View more on these topics

IFS: Predicting longevity key to better retirement planning

Crossroad signpost saying this way, that way, the other wayAdvisers need to have a better grasp of how long clients will live in order to make successful retirement plans, according to research from the Institute for Fiscal Studies.

A report published today compares how long people expect to live with the Office for National Statistics’ survival rates.

The study reveals large and systematic biases in individuals’ expectations that are important as individuals have more control over their pension wealth.

Individuals from a range of ages underestimate their chances of survival to ages 75, 80 and 85, on average.

Those in their 50s and 60s underestimate their chances of survival to age 75 by around 20 percentage points and to 85 by around 5 to 10 percentage points.

For example, men born in the 1940s who were interviewed at age 65 reported a 65 per cent chance of making it to age 75, whereas the official estimate was 83 per cent. For women, the equivalent figures were 65 per cent and 89 per cent.

Individuals in their late 70s and 80s overestimate their chances of surviving to ages 90, 95 and above, on average.

This optimism becomes larger at older ages, from 10 to 15 percentage points when looking at age 95, and is larger for men than for women.

For example, men born in the 1930s who were interviewed at age 80 reported a 32 per cent chance of making it to age 95, whereas the official estimate was 17 per cent. For women, the equivalent figures were 37 per cent and 24 per cent.

IFS research economist David Sturrock says: “As individuals are given more responsibility for saving for their retirement, and more freedom over how they use those savings in their later years, it is a particular concern that many are systematically misjudging their longevity.

“When people underestimate their chances of surviving through their 50s, 60s and 70s they may save less during working life, and spend more in the earlier years of retirement, than is appropriate given their actual survival chances.”

He adds: “In contrast, people who overestimate their survival chances at the oldest ages may show an undue reluctance to spend their remaining wealth near the end of life.

“By misjudging their longevity, individuals risk having a lower standard of living in retirement than would otherwise be possible.”



What new longevity measures mean for retirement advice

Traditional life expectancy figures are unhelpful for anyone trying to generate a sustainable retirement income For the first time, the Office for National Statistics has released life expectancy figures that include two additional measures – median and modal ages at death – which raise some interesting points for advisers. The variation between different types of life […]


Steve Webb: Tackling longevity in a post freedoms world

In days gone by, the one thing most people did not have to worry about when it came to pension planning was how long they might live. If you were a member of a defined benefit scheme, then the pension lasted as long as you did. If you had a defined contribution pot, then you […]


John Lawson: Getting it right on longevity

If recent research by The Platforum is correct, this year will see advisers recommend more clients opt for income drawdown rather than annuities. Such a wholesale shift in the recommended solution will also require an advice process that addresses all of aspects of drawdown. Aspects that people who had previously bought annuities are less familiar […]

Steve Bee

Steve Bee: Why still no justice for Waspi women?  

For calls for change to still be falling on deaf ears in 2018 is beyond disappointing There is a serious issue with our pension system today that has been allowed to continue for many years with no resolution. Over 20 years ago, the government decided to require millions of older people in the future to […]


View from the CEO

Andrew Carter, CEO of Royal London Asset Management, offers his latest view of the market. View the article here The value of investments and the income from them is not guaranteed and may go down as well as up and investors may not get back the amount originally invested. The views expressed are the author’s […]


News and expert analysis straight to your inbox

Sign up


There is one comment at the moment, we would love to hear your opinion too.

  1. Some of us will live past our life-expectancy stats, some won’t. Medical advances mean that some of us could live far beyond our life-expectancy stats.

    I can’t see any useful reference to life-expectancy stats when planning my clients’ futures as we just don’t know.

    How can making a generalised assumption that someone may live for another 25 years be sensible if they may die tomorrow or in 50 years? Isn’t it just more helpful to try to make sure the assets will last indefinitely and to cut our cloth accordingly?

Leave a comment