Number of centenarians set to grow 78% by 2041

A study by Bowmore Wealth Group has shown that, despite the morbidity blip from Covid-19, the number of people in the UK aged 100 or more is expected to grow from 16,000 in 2021 to 29,000 by 2041.

This is a 78 per cent increase, the study predicted.

It said life expectancy was expected to continue to increase possibly as a result of healthier dietary and lifestyle choices and advancements in healthcare.

As someone aged 40, I certainly hope to have more than 16 years in retirement.Tim Morris

The number of people aged over 66 is expected to grow by 38 per cent to 16.2mn in the next 20 years, up from 11.8mn in 2021.

Latest data also shows 130,000 people born in 2020, in the UK are expected to live to 100.

This is 17 times the current population of people in the UK aged 100.

Based on current life expectancies, those aged 40 in 2020, are expected to have a retirement lasting 16 years, if they retire at 66.

However, the Bowmore Group warned that many may discover their pension pot is not sufficient to fund the retirement they hope for, needing to work significantly past the retirement age.

Helen Thomas, financial planner at Financial Planning Corporation, said: "There are a number of financial planning implications that could occur if these predictions come true. 

"The first that comes to mind is the sustainability of our current pension system if people live 30-40 years past retirement age.

An ageing population adds further pressure on defined benefit schemes to provide incomes for longer periods of time.Helen Thomas

"There has been a lot of talk of raising the state pension age further, meaning that people would either have to work for longer or save a lot more into pensions and other investments to provide cash-flow at their desired retirement age.

"A consequence of increasing the state pension age is that under current rules,  it would also increase the age at which people can access their private pensions."

Thomas said: "An ageing population adds further pressure on defined benefit schemes to provide incomes for longer periods of time. I can envisage the government having to increase the minimum contribution levels into Auto-enrolment schemes too. 

"Another aspect is the impact of ill-health on an ageing population. While life expectancy may be improving, morbidity doesn’t necessarily follow, which impacts funding for long-term care, social care and the NHS."

She said that, when considering financial planning, cash-flow modelling tool is the first port of call as advisers can show the impact of ageing population predictions on a client’s finances.

Thomas added: "We will take into account ONS predictions but also can move timelines to show the impact of living for longer. We can also demonstrate the impact of paying for long-term care on financial plans.

"This helps show where there are shortfalls in provisions and helps us calculate how much needs to be saved and invested and what life cover is needed".

Scepticism

But Tim Morris, financial adviser at Russell & Co, said: "I saw this ONS report and was sceptical.

"Just prior to the pandemic, the latest state pension review in 2018 showed the rate of increase was slowing. I would’ve expected the pandemic to potentially slow this further. Perhaps the vaccine has comprehensively protected the elderly and vulnerable."

He added: "The vaccine certainly was a massive medical breakthrough and achieved in an incredibly quick timescale.

"And as someone aged 40, I certainly hope to have more than 16 years in retirement – even if I retired at my state pension age of 68. I certainly agree the majority of the public will fall short of the required pension for even 16 years though". 

Yet, with the current retirement age at 66 years old, it means an increasingly large group of people will have to fund over three decades of retirement.

Longer life expectancies mean that working past retirement age has become increasingly common, as individuals have to supplement their private pension pots to cover expenditure.

Starting a pension early and seeking good advice is encouraged.Mark Incledon

As of February 2022, there were over 1mn people aged over 65 in the workforce, 200,000 more than in 2015.

Mark Incledon of the Bowmore Group, said: “Pension pots will have to stretch far into the future – not enough of us have planned for that. A lot of us have inherited our savings habits from our parents and that isn’t adequate.

“The average person entering the workforce now is going to survive to an age that would have been seen as completely exceptional when the state pension started.”

He concluded: “Too many people get close to retirement age and discover that they should have started saving for their pension earlier.

"Starting a pension early and seeking good advice is encouraged to increase the likelihood you will be able to start your retirement on time.

"Compounding and diversified investments are processes that produce increasing rewards over a long period of time.”

calum.kapoor@ft.com