AegonMay 11 2017

Aegon warns ONS stats could lead to retirement ruin

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Aegon warns ONS stats could lead to retirement ruin

Millions may outlive their retirement savings if they rely on national life expectancy figures, Aegon has warned.

The Office for National Statistics (ONS) provides robust data on average life expectancy, but doesn’t use continuous mortality improvement (CMI) to account for changes in mortality rates over time.

For a 65-year-old entering retirement this year, and planning how long they need their savings to last, Aegon has warned relying solely on ONS figures could lead to retirement ruin.

 According to the ONS, a 65-year-old in the UK today can expect to live to age 83 if a man and near age 86 if a woman.

However, according to the research by Aegon incorporating EValue mortality improvement data, the average life expectancy is in fact seven years longer for a man at 90, and six years longer for a woman at 92.

 That means, a man with a pot of £250,000 would need to save £66,000 more to cover this further seven years in retirement if he wanted to maintain a sustainable income of £12,400 every year.

A woman with a pot of £250,000 would need to save £49,000 more to cover this further six years in retirement if she wanted to maintain a sustainable income of £10,900 every year.

 However, even these average life expectancies based on improving mortality shouldn’t be relied upon when retirement planning.

Aegon and EValue’s analysis showed that many people are likely to live even longer with women in the UK having a one in three chance of living to age to 95 and for men there is a one in four chance of living to that age.

Patrick Connolly, head of communications at Chase de Vere, said advisers shouldn't rely solely on these ONS statistics.

He said: "Life expectancy figures are average numbers based on ever changing data as people are continuing to live for longer.

"It is imperative that people plan ahead financially for a longer life and, if they are in good health, should assume that they will live considerably longer than the current quoted average figure.

"Otherwise they are at considerable risk of their money running out when they are in their later years."

stephanie.hawthorne@ft.com