Longevity & Finance: Planning for a Longer Life
- Many new retirees in the UK are substantially underestimating their life expectancy, which poses a serious threat to their retirement planning, according to Barnett Waddingham.
- A recent study by Barnett Waddingham, analyzing data from defined benefit pension schemes, revealed that women at age 65 underestimated their life expectancy by an average of seven...
- Jack Carmichael, an actuary at Barnett Waddingham, described these findings as a "wake-up call," notably for women, who are most vulnerable to the consequences of underestimating their longevity.
UK retirees are substantially underestimating their life expectancy,jeopardizing their financial futures. This critical oversight directly impacts retirement planning, potentially leading to insufficient funds in later years. Women, in particular, tend to underestimate their lifespans, by an average of seven years, which underscores the need for precise financial strategies. Expert advice emphasizes the importance of adjusting retirement planning by considering the possibility of a longer life. It also involves planning for those financial planning and possibly for changes in pension taxation. News Directory 3 brings to light how you can avoid falling into this trap! Discover what’s next in securing your financial future.
UK Retirees Underestimate Life Expectancy, Jeopardizing Financial Planning
Updated June 7, 2025
Many new retirees in the UK are substantially underestimating their life expectancy, which poses a serious threat to their retirement planning, according to Barnett Waddingham. This misjudgment can lead to inadequate financial planning and potential hardship in later years.
A recent study by Barnett Waddingham, analyzing data from defined benefit pension schemes, revealed that women at age 65 underestimated their life expectancy by an average of seven years, while men underestimated by four years. The study found women with such schemes typically live to 89, and men to 86.
Jack Carmichael, an actuary at Barnett Waddingham, described these findings as a “wake-up call,” notably for women, who are most vulnerable to the consequences of underestimating their longevity. othre wealth advisors concur, emphasizing the broad implications of this miscalculation.
This miscalculation can lead to insufficient pension savings,overly conservative investment strategies,and inadequate preparation for future care needs,Carmichael noted. He added that it’s a “ticking time bomb” for how society approaches older people’s financial well-being.
Matt conradi, deputy chief executive at Netwealth, acknowledged the issue, stating that underestimating life expectancy at retirement is “normal and natural,” often influenced by personal experiences such as the age at which their parents died.
Experts suggest women, who typically have smaller pension pots, should maximize their pension saving allowances. They also note that partners with earnings can contribute to a non-earning spouse’s pension.
Malvee Vaja, a financial planner for Rathbones Financial Planning, advises women to fully utilize their annual £20,000 allowance to save in tax-free Individual Savings Accounts (Isas). some clients have accumulated £1 million in Isas through this strategy, Vaja said.
Oliver saiman, co-founder of wealth adviser Six Degrees, pointed out that people often underestimate their chances of living past 90. Barnett Waddingham’s research indicated that only 14% of people expect to reach that age, while the actual likelihood is 28% for men and 40% for women.
Financial advisors typically model a couple’s cash flow up to age 93, or even 100, when providing retirement advice.Conradi advises against planning for death in the early 80s unless there is a pre-existing health condition.
Vaja noted that while cash flow plans often end with the death of the younger spouse, household expenditure does not necessarily decrease by half when one partner dies.
Saiman cautioned against pensioners reducing their risk exposure too early, suggesting they might need to increase it to sustain their income throughout retirement. he added that many pensioners in their 70s and 80s can handle extra risk due to continued employment income.
Advisers also noted that underestimating life expectancy can lead to missed opportunities for gifting to reduce inheritance tax liabilities, especially with upcoming changes to pension taxation in April 2027.
William Burrows, a financial adviser at Eadon & Co, said potential annuity buyers frequently enough believe the odds are stacked against them, thinking they won’t live long enough to benefit. However, Carmichael suggests that individuals with healthy lifestyles may have better odds than they realize.
“It’s not just a pensions issue,” Carmichael says. “It’s a fundamental financial challenge that demands immediate attention, and is a ticking time bomb for society’s approach to older people’s financial planning.”
What’s next
As retirees navigate the complexities of financial planning, understanding and accurately estimating life expectancy is crucial. Consulting with financial advisors and considering individual lifestyle factors can lead to more secure and fulfilling retirement years.