More than a third of people aged between 25 and 34 never think about what they will do in retirement, according to a survey by YouGov . That may seem understandable: for that age group, retirement is at least 30 years away; advancing their career, buying a house and starting a family are far more pressing concerns.

Yet a separate YouGov survey, conducted for Zurich Insurance, showed that 78% of this age group also worried that they will run out of money when they retire . That is also an understandable fear. We are all living longer - figures from the Office for National Statistics (ONS) show that average life expectancy has increased by 13.5 weeks for men and 9.8 weeks for women every year since the start of the 1980s. That means the average boy born today could expect to live until 79.1 years, and a girl to 82.8 years and, if current trends continue, that is likely to increase .

Greater awareness needed

Liz Alley, a Divisional Director in Financial Planning at Brewin Dolphin, says: 'There is a need for greater awareness of the impact of longevity across all our financial planning needs. At the age of 40, you can build in plans to deal with it but, if you do not take advice and just save whatever you think you can afford without a clear plan, there is a significant risk you will not save enough.

'These plans should be reviewed every year while people are still in the accumulation phase to ensure that the goals and financial targets remain appropriate and are likely to be met.'

Alley advises that people estimate how long they will live, for example, by looking at their family history as well as ONS statistics on average life expectancy. They should then consider how much they need to spend to give a total fund required. Pension experts have a rule of thumb that pension income should be about two-thirds of salary levels at retirement. However, individuals can choose to be more scientific about this, taking into account expected outgoings, the likelihood of carrying on with part-time work and other considerations.

'It is a common assumption that outgoings fall on retirement,' says Alley - 'that the mortgage may be paid off and the children less expensive. But if you are spending more time at home, household bills will be larger and there could be higher leisure spending.'

She adds that there are various investment products, as well as pensions, to help with this, including structured products, annuities, ISAs and making full use of capital gains tax allowances. Recent pension reforms have also made it easier to access pensions in the most tax-efficient way.

Life insurance

But pensions are not the only things influenced by longevity. Richard Eagling, Head of Pensions and Protection at Moneyfacts says: 'Not surprisingly, most individuals have little understanding of mortality rates and how these could impact their financial planning priorities. There is a tendency among the young to overlook the need for life insurance even though this should be a priority for those with families.
'While adequate protection is always important regardless of age, it could be argued that older individuals may have a lesser need if they have repaid their mortgage and have no family financial commitments. Ultimately both over- and underestimation of future mortality rates can present dangers for consumers, meaning their assumptions for the need for protection products as well as their retirement planning and retirement choices are wide of the mark.'

The value of investments can fall and you may get back less than you invested.

No investment is suitable in all cases and if you have any doubts as to an investment's suitability then you should contact us.

Any tax allowances or thresholds mentioned are based on personal circumstances and current legislation which is subject to change.

The information contained in this document is believed to be reliable and accurate, but without further investigation cannot be warranted as to accuracy or completeness.

https://yougov.co.uk/news/2014/11/05/concept-gradual-retirement-attracts-non-retired-ad/

https://www.zurich.co.uk/en/about-us/customer-news/industry-news/2015/britons-likely-to-outlive-savings-as-two-thirds-underestimate-longevity

http://ons.gov.uk/ons/rel/lifetables/national-life-tables/2012-2014/stb-life-tables-2012-2014.html

Brewin Dolphin Holdings plc issued this content on 31 March 2016 and is solely responsible for the information contained herein. Distributed by Public, unedited and unaltered, on 19 April 2016 15:28:18 UTC

Original Document: https://www.brewin.co.uk/insight/financial-planning/the-longevity-game