Rethinking my future

I cite data about how the average life expectancy at birth today is 79.5 years for males and 83.2 for females and will be 84.4 for males and 87.2 for females by 2039 and life expectancy at older ages even higher. Women can expect to live for a further 13 years at age 75 and another 7 years at age 85. And yet for some reason it hadn’t sunk in. It was only when I got a personalised prediction that I exclaimed “OMG!”

This revelation prompted me to take action to address another nagging worry. Am I saving enough for my later life? I’d just received my pension statement from my previous employer so I had the information to hand. I plugged the data into an online pension calculator to see the results.

For starters it suggested I would need to work until I’m 70. Given our research that being in fulfilling work in later life can have positive benefits this did not worry me too much. Both my parents in law had worked well into their 70s – partly motivated by financial necessity, it also kept them active and they clearly enjoyed the social aspects of work.

Secondly, the tool suggested how much I should be saving to my pension each month. The current state of the financial markets and the prospect of negative interest rates mean the level of growth I can expect on any savings is very uncertain. I pride myself on being reasonably numerate and yet these uncertainties leave me unsure whether I am doing the right thing. Recent research from Britainthinks for Aviva showed just how bewildering people find pensions and underlines the need for better access to independent information and advice from trusted sources, regardless of one’s income.

The tool also highlighted the consequences of not having saved enough – a period of later life in which I would have to live off the state pension and a modest income from the small defined benefit pension schemes I had contributed to. Many older women in particular find themselves financially insecure; with a very modest personal pension, if any, due to lower life time earnings, career breaks for caring, and, if widowed, a much reduced income than they enjoyed when their husbands were alive. Added to this, women born in the 1950s must now wait longer to draw their state pension. An issue highlighted this week by Ros Altman, former Pensions Minister.

What the tool did not do was give me a realistic view of what quality of life the money would buy so far in the future. If I look back 50 years, standards of living and the cost of living have changed beyond recognition. How will they look in 50 years? One woman in her 70s I know finds herself a few pounds over the threshold for pension credit and ineligible for other benefits. She is a home owner but struggles to pay bills and maintain her home. This is before she faces any costs of care.

Our research is clear that financial insecurity in later life has a negative impact on wellbeing. The government suggests we need about two thirds of our final salary to maintain our lifestyle on retirement. If people at younger ages are to respond to this, information needs to make more salient for everyone whether on low incomes or higher incomes, the lifestyle their retirement income will buy.

The final conversation this revelation provoked was with my husband (of 13 years). We joked that we might yet get to celebrate our golden wedding anniversary. More seriously, we should probably talk more about our later life – our aspirations, our financial plans, our wishes if one of us becomes ill or dies – and ensure we have up-to-date wills, life insurance and death benefits.

Money, home, work, relationships. All took on a fresh perspective in the light of a life expectancy of 93.

Many people think about these issues too late. For others life events happen and prevent them from saving or contributing to a pension. For many others there simply isn’t the money to save when the bills are paid. The Centre for Ageing Better wants more people to feel prepared for later life. We will be exploring how we can contribute to this goal in coming months.