Good news: you may die earlier than you think

a coffin in a morgue with a...

We may not live as long as we expect. New calculations have revealed that life expectancy is actually falling - so that now men aged 65 are expected to live 22.2 years in retirement - down from 22.8 years in 2013. It's not great if you have 23 years of retirement activities planned, but it could help ease your pension planning headaches.

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The new projections, from the Institute and Faculty of Actuaries, found that life expectancy for retired women is dropping too - they are now expected to live for another 24.1 years - down from 25.1 years in 2013.

The institute explained that it had changed its predictions not because people were dying younger, but because the rate at which life expectancy was growing was slowing down.

For the past few decades life expectancy has been growing rapidly, but since 2011 that trend has appeared to slow down. In 2016, mortality rates were about 11% higher than they would have been if the trend we saw between 2000 and 2011 had continued.

Why?

There has been a fair amount of debate about why. Glyn Bradley, Principal in Mercer's Innovation, Policy and Research team says that NHS cuts and the impact of a strained health and social care system may be playing its part.

There has also been speculation about the effects of growing obesity, sugar consumption, and increasingly sedentary lifestyles. If this is the case, then in the future, although we are likely to continue to see people living longer and longer - the rate of increase may slow down even further.

It's not brilliant news for anyone who hoped to live forever, but for those with more realistic ambitions, it could have a very useful silver lining: it would mean that saving for retirement isn't quite the enormous challenge we thought, and raises the possibility that people who have saved enormous sums for their retirement - expecting to live for 25 years or more in retirement - may only have a couple of decades in which to splash the cash.

Not so fast...

However, Bradley also points out that in 2016 the winter flu season actually started in December - earlier than usual. It meant that the figures for the year factored in two winter flu seasons rather than one - so the change could be evened out in the mortality figures for next year.

He adds: "The long-term drivers of future improvements in life expectancy remain. Medical research, application of past breakthroughs, innovative use of technology and potential for lifestyle improvements all mean that lifespans will continue to increase."

Perhaps all that these new figures demonstrate is just how incredibly difficult it is to guess how long we will live in retirement - and therefore how much cash we need to set aside.

Unfortunately, it means we're going to have to hold back from blowing our pension pot - because the funds may need to last us a bit longer after-all.

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How we spend our pensions

Figures from Saga show that the over 50s now account for the majority of money spent by Brits on travel and tourism. They have the time to spare, the money, and they are healthy enough to take on the world.

A poll from Abta found that in the wake of pension freedoms, 35% of people were considering cashing in at least part of their pension to travel. A separate study by Senior Railcard found that pensioners take an average of three holidays a year, plus two weekends away, and 17 day trips.

Research from Senior Railcard found that retirees eat out an average of three times a month. However, one in ten do so more than twice a week, and one in three people said that one of the first things they did when they retired was to go out for lunch with their friends.

Of course, just because retirees want to enjoy themselves, it doesn't mean they are happy to throw money away. The vast majority are keen to eat at lunchtimes, when a fixed lunch menu tends to be cheaper, and canny retirees are skilled at tracking down pensioner special offers too.

Figures from the Office for National Statistics show that on average nearly a fifth of the money spent by people aged 65-74 is on leisure. This includes everything from the cinema and theatre to golfing and gardening. They spent more on this than on food, energy bills and transport.

A report by Canada Life found that retirees are spending £4,279 a year on having fun - that’s more than £1,000 more than they spend on boring essentials, and is a 74% increase over the past ten years. It went on to predict that this trend was set to continue, and that pension freedoms would encourage people to spoil themselves a bit more in retirement

Pensioner property wealth is now over £850 billion, and all these family homes don’t look after themselves. The Senior Railcard survey put home renovations in the top 20 activities people got stuck into on retirement, and figures from ABTA found that almost a third of people who were considering raiding their pension pots under the new pension freedoms planned to spend the cash on their home. This seems like an eminently sensible investment - looking after what is undoubtedly their most valuable asset.

Unsurprisingly, while some pensioners are very well off indeed, others are struggling with debt. Figures from Key Retirement found that the average retiree has £34,000 of debt.

Most of this is mortgage borrowing - in many cases driven up by the number of people who unwittingly signed up to an interest-only mortgage. However, credit cards, overdrafts, and loans are also common. It’s why so many pensioners have used pension freedoms to access enough cash to pay their debts.

The day to day basics are swallowing up their fair share of pensioner cash too. On average, people aged 65-74 spend a third of their weekly income on essentials like food and bills - which is hardly living the high life.
The bank of gran and grandad has become an increasingly vital source of cash for families. According to Key Retirement, of those who release equity from their property, 21% of them use the cash to treat their children and grandchildren. This includes an average of £33,350 to help children get onto the property ladder, £6,000 to buy them a new car, £11,000 on family weddings, and £24,780 giving grandchildren a helping hand.

While retirees are quite rightly spending what they need to enjoy retirement, they are hardly all throwing caution to the wind, buying flash cars and spending the kids' inheritance.

Most expect to have something left over to pass onto their family after their death. Some 69% expect to leave property in their wills, and 75% expect to leave cash - according to Unbiased.co.uk - because while baby boomers know how to have fun - they also know how to save for the future.

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