Living to 100 and beyond ...

According to a report in the Telegraph (29th December 2010), 10 million people who are alive in the UK today will live to more than 100 years old.

That is both good and bad news. Of course, nobody wants to die, so the prospect of living to more than a hundred years of age sounds appealing. There are, however, a number of issues that, while not necessarily detracting from what is really good news, should at least give us pause for thought. All it takes is a little planning to ensure that increased longevity is the bonus that it should be.

Making your savings last longer
The key issue for most of us, especially those who are already over 50 (and therefore have less time to build up additional pension funds) is that our money is going to have to last much longer for us. Purchasing an annuity with your pension fund when you retire may sound a good idea, as this gives you a guaranteed income for the rest of your life. Unfortunately, because insurance companies know that we are living longer, and as interest rates are currently very low, annuity rates are nothing like as high as they once were. This means that we will receive a smaller annual pension, for a given pension fund, than a decade or so ago. The solution to this comes in several stages. The first is to maximise the amount we put into our pension provision so that we have more money available to live off later on in life. The second is to consider gradually ‘phasing in’ retirement, rather than giving up work on one day, using the changeover period to enhance our retirement pots. This is made easier by a rule change that means we can now manage the way we take income from our pension plans without having to buy an annuity. In fact many of us will not even have to buy an annuity when we reach the age of 75 as once was the case.

Health is an issue
As we get older our health may deteriorate and we could start to need more assistance in coping with activities of daily living. There are forms of investment designed to assist with what is called ‘long term care’ and these can be funded in a number of ways, including lump sum investments and funding by releasing equity from the family home. Hopefully, improvements in health care will ensure that many of us remain far fitter for longer than was once the case, so the average time for which long term care is required is not much longer than at present. It is important always to seek independent financial advice before making any decision regarding your finances. The value of investments is not guaranteed; you may get back less than you put in.

The Financial Planning Partners Ltd are a dedicated team of advisors covering all aspects of financial advice including SIPP's, retirement planning, taxation, corporate planning, investments and savings. Visit us online to speak to one of our IFA's.