Making Your Pension Last

One of the great conundrums of retirement planning is ‘How long do I need my pension planning to last for?’ It is a legitimate question and one that it is almost impossible to answer for the vast amount of people.

Get it wrong by overestimating life expectancy and you may not get the fullest value out of your pension funds and therefore not have the retirement you require or deserve, underestimate life expectancy and you face the risk of running out of cash and the possibility of having to reduce expenditure. According to a recent study* nearly 80% of over 50s are significantly underestimating their life expectancy. Official government figures have shown that average life expectancy is actually 90 for a woman and 88 for men. And since pension freedoms and the ability to access your retirement income from 55, it is key that people have a better understanding on how long they are actually likely to live.

Whilst it is possible to work out average life expectancy, it is almost impossible to calculate how long you’re likely to live. By definition, average life expectancy is the point at which half of the people sampled passed away, meaning that half will actually live longer than the average. The most common trend seems to be people underestimating how long they are likely to live in their retirement, which could mean retirees can be left with a shortfall in pension income that they may not be prepared for. One way to avoid this problem would be to purchase a lifetime annuity, this would offer you a guaranteed income for life, no matter how long you live.

There are many different types of annuities which may be relevant to you depending on your situation. For example a joint plan with a partner or spouse, which would continue to pay them all or some of your income if you were Research from Which? has shown that you could enhance your pension income by 50% from an enhanced annuity, therefore it is key that you look into this before you purchase, or you may be missing out on income. Remember, you do not have to buy your annuity from the pension provider you have been saving with, shopping around for the best deal could boost your income by as much as 50%. This is where Age Partnership’s Pension Income specialists can help. They compare annuities across a whole range of leading providers to provide you with the best deal and a retirement income.