Most people spend years focused on building their pension pot.
They check their balance, increase their contributions when they can, and hope their investments perform well.
But far fewer give serious thought to the other side of the equation and consider how long that money needs to last.
It’s an easy thing to overlook. Retirement can feel like a finish line, the point at which your hard work pays off. In reality, it’s the start of a financial chapter that could span three decades or more.
Getting your head around that early enough to do something about it is one of the most valuable things you can do for your future self.
This blog looks at what the UK’s latest life expectancy figures tell us, why they should shape your retirement planning, and some practical steps to help your pension go the distance.
We’re living longer
According to the Office for National Statistics (ONS), average life expectancy in the UK currently stands at 79 years for men and 83 years for women. Those figures have been rising steadily for decades, and the trend shows no signs of reversing. These are averages across the whole population, including people who died young due to illness, accidents or other causes. So, the people who make it to retirement age in good health tend to live longer than the headline figures suggest.
For example, according to the ONS’ life expectancy calculator, a 66-year-old man in good health today has a one-in-four chance of living past 90, and a one-in-ten chance of living past 95. For women, the odds of reaching 90 are better still. And for a couple who both retire at 66, there’s a meaningful chance that at least one of them will still be alive at 90 or beyond.
None of this is meant to be unsettling. But it does mean that you can’t just focus your retirement planning on accumulating a larger pension pot.
Instead, you must think seriously about how you manage that pot over what could be a very long time.
So, how long should you plan for?
For most people retiring around state pension age (currently 66 but set to rise to 67 over the next two years), planning for a retirement of 25 to 30 years is a sensible starting point.
If you retire at 66 and build your plan around living to 95, that’s nearly three decades of income to fund.
It can feel like a long way off when you’re in your 50s, but the maths has a way of concentrating the mind. A pension that looks comfortable at 66 might look quite different at 85 if your withdrawals have been too high, your investment returns have disappointed, or care costs have entered the picture.
The consequences of running out of money later in retirement are far more serious than having a modest surplus left over. Planning conservatively and assuming a longer retirement is a much safer approach than hoping for the best.
The state pension alone won’t be enough
The full new State Pension currently stands at £241.30 a week, or £12,547 a year. For most people, that’s a helpful foundation, but it falls well short of what’s needed for a comfortable retirement.
To put it in context, the Pensions and Lifetime Savings Association estimates that a single person needs around £13,400 a year for a ‘minimum’ retirement, £31,700 for a ‘moderate’ one, and £43,900 for a ‘comfortable’ lifestyle. For couples, those figures are higher. The State Pension doesn’t even cover the minimum for a single person, leaving a significant gap for anyone hoping for more than a very modest retirement.
The point isn’t to alarm, but to underline why your private pension, ISAs and other savings and investments all matter, and why making them last needs to be part of your thinking from the start.
Five ways to help your pension last longer
Knowing that your pension might need to last 25 or 30 years is one thing, but making sure it does is another. Here are five practical steps worth building into your retirement planning:
Keep some money invested
There’s a natural temptation to move everything into lower-risk assets the moment you retire. Caution is understandable, but going too conservative too early can work against you over a 25 or 30-year retirement.
Leaving a meaningful portion of your pension invested in growth-oriented assets helps your pot keep pace with inflation and continue growing over time. You might potentially have three decades for your investments to compound. Pulling everything into cash or low-return bonds at the start of that period could cost you in the long run.
Think about a phased retirement
Rather than stopping work entirely at 66, gradually reducing your hours over a few years has real financial advantages. It gives your pension pot more time to grow, reduces the number of years it needs to fully support you, and can make the transition into full retirement feel much more manageable, both financially and psychologically. Phased retirement isn’t for everyone, but for those who have the option, it’s worth weighing up seriously.
Don’t take too much, too soon
One of the most common mistakes retirees make is drawing down too heavily in the early years. It’s understandable. Retirement is new, there are things you want to do, and your health is good. But withdrawing at an unsustainable rate in your 60s can leave your pot seriously depleted by the time you reach your 80s.
A widely used rule of thumb is to withdraw no more than 3-4% of your pension pot annually. At 4%, a pot of £300,000 would support an income of £12,000 a year. That’s a rough guide rather than a fixed rule. Your own circumstances, other income sources, and investment returns will all affect what’s sustainable. But it’s a useful starting point for thinking about how much you can safely take each year.
Use your other savings and allowances
Your pension doesn’t have to do all the heavy lifting. ISAs, for example, provide tax-free income in retirement and can be used to supplement your pension withdrawals, reducing the amount you need to draw from your pension pot in any given year.
The order in which you draw from different pots can make a real difference to your overall tax position, too. Your financial adviser can help you work out the most efficient sequence for your circumstances.
Plan for inflation
Retirement income that feels comfortable at 66 may buy considerably less by the time you reach 80. At 2% annual inflation, a relatively modest assumption, the purchasing power of a fixed income will halve over 35 years. At higher rates, the erosion happens faster.
Your retirement planning strategy needs to be built around rising costs, not just what you need today. That means thinking about how your income will grow over time, not just what it looks like on day one.
Think about care costs
It’s a subject many people would rather not dwell on, but later-life care is a financial reality you’re your retirement plan needs to account for. The average weekly cost of residential care in the East Midlands is around £1,197, with nursing care costing more. For anyone spending two or three years in full-time care, the total cost can run to six figures.
The NHS covers some care needs, but not all, and not always. Factoring potential care costs into your long-term retirement plan, even as a contingency, is far better than discovering the gap when it’s too late to do much about it.
How can Glenrose Financial Planners help?
Working out how long your pension needs to last, and whether it will, is one of the more complex parts of retirement planning. There are a lot of variables involved, such as life expectancy, investment returns, inflation, tax, spending patterns and potential care needs, to name a few.
At Glenrose, we help clients to model these scenarios in a way that makes sense for their individual circumstances. We can help you understand whether your current pension provisions are likely to last the course, identify any gaps, and put a strategy in place to give your money the best possible chance of supporting you for as long as you need it to.
If you’d like to talk through your retirement plans, book a consultation with one of our advisers. It’s a conversation that’s worth having sooner rather than later.