Workers must increase their pension contributions to ensure a comfortable retirement.
Saving for retirement has never been so important, as latest life expectancy figures reveal the number of people aged 65 and over is expected to soar in the coming years.
In 2016, there were 11.8 million people in the UK aged 65 and over, accounting for 18% of the population. That had climbed from 9.1 million people – 15.8% of the population – 25 years before.
Now, new figures from the Office for National Statistics reveal there will be an additional 8.6 million people aged 65 and over in 50 years’ time.
The 85-plus age group is expected to grow fastest. In 2016 there were 1.6 million aged 85 and over – 2% of the population – and this is likely to double to 3.2 million by 2041. By 2066, over-85s are likely to make up 7% of the population.
As life expectancy increases, so too does the number of years that people are likely to spend in retirement, making pension saving more important than ever.
Ed Monk, associate director for personal investing at Fidelity International, comments: "Longer living will be very much the norm, and it is up to both government and individuals to respond. The ONS work today lays out the areas - including the state pension, health and social care services and local transport - that will come under increasing strain as more older people come to rely on them. Meanwhile, there will be relatively fewer working age people to pay taxes to fund those services."
Fidelity carried out some research last year with the Oxford Institute of Population Ageing, which showed that those people who are 45 now and go on to reach 65 will have an average life expectancy almost three years longer than today’s 65-year-olds. "That’s three years longer in retirement to plan and to pay for," adds Mr Monk.
As many people approach retirement age and find they have insufficient savings to fund retirement, the number of older workers is also increasing. Two decades ago, just 5% of those aged 65 or older were still working, but today it is more than 10%.
Research by Aegon reveals that one in four people expect to still be working at age 70, while some 14% think they will still be paying off their mortgage at that age.
Meanwhile, analysis by Aviva found that two-thirds of the 10.2 million over-50s in work are now planning to retire later than they thought they would. Some 40% say this is because of rising living costs and 38% say it is because they have insufficient pension savings.
While auto-enrolment has got millions of people savings for retirement, there are concerns that individuals are still not saving enough to ensure a comfortable future. Many women in particular, it is feared, will not have a large enough pension pot to last their retirement. The Pension Policy Institute has estimated as many as one in four retirees could outlive their pension pots.
But experts say saving just a little more each month could significantly boost retirement savings. Research by Fidelity found that contributing an extra £6 a week could enhance your pension pot by as much as £60,000 by the time you retire.
Nathan Long, senior pension analyst at Hargreaves Lansdown, says: "The government’s workplace pensions programme has sent the number of people saving for retirement ballooning, but the amount being saved isn’t enough. To really gain control of when you leave work, consider upping the amount you pay in. Anyone retiring today need to ensure their pension will last as long as they do."
Steve Cameron, pensions director at Aegon, says: "Living longer is great news if you have the resources, and good health, to enjoy it. Individuals need to have a clear understanding of what the government will provide and what they’ll be expected to pay if they need social care in the future."
This article first appeared on our sister website Money Observer.