Socio-economic grouping, health and lifestyle factors are interrelated, with a growing body of research indicating that health outcomes in Britain are linked to socio-economic circumstances5. These factors are all helpful in informing individual life expectancy, but it’s still an inexact science, which is why many advisers routinely plan to 100 years. There is, however, an issue with this approach. A ‘safe’ withdrawal rate at 65 is usually considered to be 3-3.5% each year6, but this may not be enough for many people to live comfortably. Of course, there’s the State Pension and clients may have a defined benefit pension or other assets that they can draw an income from. Increasingly, property equity will become a valuable asset to help fund retirement, via downsizing or equity release.
One option you could consider for your clients, to reduce the risk posed by longevity, is a secure guaranteed income. The risk of a client living longer than their retirement savings last may be reduced, or removed, when an income is payable for life. What’s more, 62% of our customers who purchased annuities 23 years ago, are still alive and drawing their annuity income7.
We’re living for longer and choosing more varied retirements than ever before. Although we don’t know how long an individual may live, we can take steps to help them deal with this uncertainty. A guaranteed income to underpin a client’s portfolio, and cover essential spending, can largely mitigate longevity risk, while providing the freedom to invest a client’s other assets with more flexibility.
Want to know more?
If you would like to discuss the impact of longevity on retirement planning, or find out how guaranteed income can support your clients’ objectives, contact our dedicated team of account managers.
Do statistics help or hinder longevity conversations with clients?
During our recent webinar, our panellists shared their views on some of the benefits and drawbacks of using statistics during conversations with clients.
The long and short of longevity risk webinar recording is available to watch on demand.
1Can we help consumers avoid running out of money in retirement?, Institute and Faculty of Actuaries, March 2018
4 Legal & General’s predicted view of the survival of a healthy 65-year-old woman in a more advantaged socio-economic circumstance.
5 Health gap between rich and poor has widened, UCL.
6 Can we help consumers avoid running out of money in retirement?, Institute and Faculty of Actuaries, March 2018.
7 How many of the annuitants who purchased in 1997 are alive today? Legal & General Retail Retirement Income customer data.