If you have little or no pension savings and are 65 years old now, how long do you think you will live and how much money will you need to finance your later years?
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The staggering answer is 767,000 men and women who reached their 654th birthday last year are likely to live to at least celebrate the 100th birthday.
That breaks down as 374,000 men and 393,000 women, according to the Office of National Statistics.
As a proportion, that’s 8% of men and 14% of women.
For younger men and women, the statistics say they have a much bigger chance of living to their 100th birthday due to advances in diet, technology and medicine.
How much pension will you need?
To put the figures in perspective, the total number of men and women aged 100 or more will rise from 14,000 in 2013 to 111,000 in 2037.
If you are one of those 65 year olds expecting to live to 100 years old, then you will have to fund 35 years of not working.
With an average pension pot amounting to around £40,000 and the single person’s pension likely to be about £144 a week, a standard annuity will pay an average £185 a month.
Add those figures up, and that is £809 a month or £9,708 a year – and that’s providing the pension pot stays intact and no tax-free lump sum is drawn.
In real terms, even though the sum will be index-linked, it’s only about two-thirds of the National Minimum Wage pay rate.
Review your investments
So the big question is how can someone approaching retirement increase their spending power once they give up work?
The first action is stop spending. Anyone approaching retirement who splashes out thousands on exotic holidays or hobbies is spending money they will not be able to replace in retirement.
Next, look at how money in a pension fund is invested. Speaking to a financial adviser and shifting money between funds inside a pension can generate a larger fund effectively and relatively cheaply.
For British pension holders and international workers with British pension rights who plan to live permanently overseas, a Qualifying Recognised Overseas Pension Schemes (QROPS) could be a solution.
QROPS offer flexible investment options and tax-free returns, but may not be suitable for retirement savers with a workplace pension paying extra benefits.
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