Can you AFFORD to dwell to 100? How to make your pension stretch additional if YOU defy the percentages

More people than ever are living to 100 so it is wise to plan your finances to stretch over a long retirement, according to experts..

A man aged 65 now can expect to live to 85 and a woman to 88 on average, according to official calculations. But naturally many will defy expectations and keep going a lot longer.

The number of people aged 90-plus jumped to an estimated 625,000 in 2024, up by more than a half since 2004, the latest available figures reveal.

There were also 16,600 centenarians – people aged 100 years and over – up from 8,300 over the same two decades.

There will be many people in their 60s now who beat the odds and live very long lives, says AJ Bell.

We explain how to organise your finances at retirement, and see below for further tips on making your pension funds last.

The most recent data from the Office for National Statistics found men’s life expectancy after the age of 90 is rising faster than that of women.

From 2004 to 2024 the number of men aged 90-plus more than doubled. The number of women in this age group increased by around a third, although they still made up two thirds of the total.

Meanwhile, a yawning gap in health and life expectancy between rich and poor people was revealed in new official figures last week.

Men in affluent areas tend to live more than a decade longer than those in the most deprived parts of England, while for women the gap is about eight years.

But the length of time better off people can expect to enjoy good health is much more stark, at 19-plus extra years for men and more than 20 years for women.

This comes as the state pension age has just started increasing from 66 to 67. Meanwhile, the minimum age you can start accessing private pensions will rise from 55 to 57 overnight on 6 April 2028.

Sarah Coles, of AJ Bell, said: ‘As more people are living into their 90s, we all need to consider how we would pay for three decades or longer in retirement.

‘As early as possible, it’s worth using a pension calculator to see what you may be able to build by retirement and the income you’re likely to be able to take from it.

‘If you need to take more, it’s worth considering how long you might reasonably expect your pot to last. 

‘This process will reveal whether you need to consider boosting your pension contributions.’

How to make your pension last

Coles offers the following tips, which will be useful to anyone older but especially those in good health who are making decisions about retirement income.

1. Take natural income from investments

One way to be certain a pension drawdown pot lasts for life is to take just the natural yield from your investments, says Coles.

This is where you take the income from dividends produced by your investments, so you don’t eat into the capital itself.

This means the pot continues to grow and has the potential to keep up with inflation.

You will need a substantial pot, with enough savings and investments elsewhere to give you flexibility over how much income you can take, but it’s a great way not only to protect an income for life, but also to give you flexibility if you need to dip into the pot for care needs.

2. Could you cope with a stingier state pension

Most calculators will give you the option of factoring in the state pension. It’s worth doing the calculations both with and without, to see where you stand.

Nobody is suggesting the state pension will disappear altogether in the near future, but when you’re forecasting decades ahead, it pays to bear in mind that no state benefits are ever written in stone.

3. Consider inflation when buying an annuity

If you opt for an annuity, you will have an income for life, but it’s vital to consider inflation. Over three decades it can have a dramatic impact on the spending power of your income.

Prices have more than doubled in the past 30 years, so you need to understand the impact on your quality of life. You can opt for an inflation-linked annuity to overcome this, but you need to accept that the initial income will be much lower.

4. Combine an annuity and investment drawdown strategy

Taking the annuity route offers certainty, but it removes flexibility over how much income you can take, so you also need to think about how you would cover the cost of any care.

It’s one reason why people often combine annuities and drawdown, either at the same time or at different stages of life.