Can you afford to live to 100?
There’s a better chance than ever that someone reading this article is over 90. If that’s you, congratulations. But if it’s not, you might need to start preparing.
An estimated 550,835 people in England and Wales were in their 90s in 2022, according to the latest data from the Office for National Statistics (ONS), released last week. That’s the highest total since ONS records began.
The number of people aged 100 and over has also increased – to 15,120, double the number in 2002.
A long and healthy life is, of course, a blessing. But with average UK life expectancy at 78.6 years for males and 82.6 years for females, reaching your 100th birthday might come as a surprise.
The last thing you want is to run out of money. So we’ve rounded up everything you need to do to prepare for a (perhaps surprisingly) longer life.
How much money do you need for retirement?
Every year, Which? analyses thousands of pensioners' spending habits to create three ‘income targets’ for retirement. This is the amount we think you’ll need in your pension (state and private) after tax is deducted.
Our latest targets are as follows:
| ‘Essential’ income target | Covers essentials like food, drink, housing, transport & utilities | £13,000 for a single-person household £19,000 for a two-person household |
| 'Comfortable' income target | Covers the above plus regular short-haul holidays, recreation, leisure, alcohol, tobacco, gifts to family and friends, and charitable donations | £20,000 for a single-person household £28,000 for a two-person household |
| 'Luxury' income target | Covers the above plus extended or long-haul holidays, health club memberships, home improvements, private healthcare and a new car every five years | £32,000 for a single-person household £44,000 for a two-person household |
Source: Our research is based on responses from 5,231 retired and semi-retired Which? members in March 2023.
- Find out more: how much will you need to retire?
Will the state pension be enough?
The current state pension for men born on or after 6 April 1951 and women born after 6 April 1953 is £203.85 a week or £10,600.20 a year.
If you live with a partner and both qualify for the full state pension – for which you’ll need to have 30 years’ worth of National Insurance contributions or credits – you’ll have enough to reach our ‘essential’ income target. But you couldn’t afford any of the extras you might want to enjoy in retirement.
If you don’t qualify for the full amount, you’ll either need to top up your state pension or simply take a lower level of state pension.
And if you live alone, our research shows the state pension alone won't be enough to cover even the essentials.
- Find out more: how much state pension will I get?
How to make your pension last longer
As the state pension might not be enough for the retirement you want, that leaves a private pension.
As a single person, you’d need to make around £10,000 a year from your private pension to reach our ‘comfortable’ income target, or about £20,000 for the ‘luxury’ target.
Crucially, you’ll need that to be coming in for potentially more than 30 years if you retire at 66 and live to 100.
Investment platform AJ Bell says the best way to do this is to buy an annuity: ‘The surest way to make your pension last a lifetime is to buy an inflation-protected annuity – an insurance product which pays a guaranteed income for life.
‘If you’re going to go down this route, shopping around for the best rate – and making sure your provider knows of any health conditions which might impact on your life expectancy – is essential.’
Buying an annuity is complicated, and since it’s a lifetime commitment it’s important to get it right.
- Find out more: step-by-step guide to buying an annuity
How else can you make your pension go further?
Buying an annuity has become less popular since the pension changes of 2015 came into effect. Since then, most people have opted to ‘draw down’ on their saved private pension pot, taking part of it at a time, or all of it at once.
Depending on how much you’ve saved in your lifetime, this could be enough to fund your retirement. But it’s not a set rate of guaranteed income for life like an annuity is.
Private pensions are invested in the stock market, so this approach doesn’t necessarily mean you’ll ‘run out’ of money. In fact, the pot should still grow if the fund is managed well.
- Find out more: what can I do with my pension savings?
How to make sure you save enough
A 2023 survey from pension provider Aegon found that 45% of people are worried about running out of money in retirement.
This was a greater concern than declining physical health (39%) for the 1,000 UK residents it surveyed. Protecting yourself from this possibility starts with saving early.
AJ Bell says a 25-year-old should save £350 a month (including employer contributions) to have £625,000 for retirement.
By law, your employer must put at least 8% of your earnings into your pension pot. The employer itself must contribute at least 3% of that amount (with, in this case, the other 5% coming from the employee).
With many employers, you can ask to contribute more of your monthly income to your pension, with the employer increasing its contribution proportionately.
If you’re in such a scheme and are only making the minimum contribution at the moment, consider increasing this to take advantage of the extra cash on offer from your employer.
- Find out more: defined contribution pensions explained
