Anyone celebrating their 65th birthday this year should expect another 20 years on average – and need a pension pot of £121,000 to provide the average expected retirement income.
The longevity figures are based on Office of National Statistics data, while the financial estimate comes from research by financial firm Prudential.
People approaching retirement told the firm they feel an average income of around £15,800 a year including the state pension.
Currently, the state pension is worth around £5,880 to a single pensioner – leaving an investment return of £10,000 a year to make up the full £15,800.
However, longevity figures also predict many people will live for 25 or 30 years after their 65th birthday, which increases the cash return they need from a pension.
Where people live the longest
For someone living an extra 25 years, the pension pot generating income rises to £139,000, while for someone living an extra 30 years after their 65th birthday, the pension fund needs to top £154,000.
How much money a pensioner needs to fund a comfortable retirement not only depends on how long they live after retirement, but where they live as well.
The places with the longest expected retirement ages are East Dorset and Harrow, North London. East Dorset already has the highest proportion of pensioners in the local population. The level stands at 28%.
Christchurch, in East Dorset, has the nation’s highest number of pensioners per head of population – with 30% of all people over 65 years old.
Vince Smith-Hughes, retirement income expert at Prudential, said: “New rules allowing retirement savers to access their pensions are all well and good, but some decisions need making about how long people should expect their savings to last.
Outliving savings
“In some cases, many will live well into their 90s and could possibly outlive their savings if they do not invest and spend wisely.
“This is especially important if people intend to draw the cash from their pensions as an income instead of living off the cash generated from investments.”
Financial advisers warn that relying on the state pension will not fund more than a basic lifestyle and that many people may spend their savings too quickly, leaving them impoverished in their later years.
The big expense many people will have to provide for are increased care costs as they get older.
“It’s easy to get the figures wrong and over estimate the value of the state pension and savings,” said Smith-Hughes. “With so many pension and retirement options, people need to sit down and work out their figures so they are not left without any money.”
