Men and women aged 50 and over expect to live to 80

On average, people over 50 predict they will live to be 80 years old, which is notably different from current longevity data, especially for women, a new study finds.

When asked, both sexes make the same life expectancy, although a 50-year-old man lives to an average of 84, while a woman lives to 87, according to calculations by the Office of National Statistics.

It’s good news that people will live longer than they think, but the gap between expectation and reality could put additional pressure on retirement planning, says Canada Life, which conducted the study.

The retirement firm points out that the majority of seniors currently prefer “uncertain retirement income” — investing your fund and living off retirement withdrawals — over annuities it calls a “100 percent bet” against surviving retirement.

The 2015 pension freedom reforms prompted most savers to keep their money invested.

This is because if you invest successfully, your fund will continue to replenish or even grow, and if there is anything left in your pot when you pass away, pensions are also a tax-friendly way to pass on wealth to your loved ones.

Despite the benefit of guaranteed income until you die, annuities have been shunned for years due to poor rates and restrictive terms.

However, annuity deals are currently skyrocketing as inflation numbers have fueled expectations that interest rates will remain high for longer. This has led to increases in yields on (or interest on) UK government bonds, known as gilts, which are used to generate annuity income.

For £100,000, a healthy 65-year-old can buy a one-off annuity with no inflation protection and a five-year guarantee – protecting your money immediately after purchase – for a rate of over 7 per cent.

That represents a lifetime income of around £7,030 a year, up from £6,790 just a few weeks ago and the £5,690 you could have gotten in May last year, according to average industry figures compiled by Hargreaves Lansdown (see below). table).

Many people still have old final salary pensions, which also provide guaranteed income for life, as well as the state pension which is currently £10,600 a year if you qualify for the full rate.

People looking at the best way to finance old age will want to consider these sources of income, as well as other savings, investments, and financial assets.

Meanwhile, here we’ve looked at the pros and cons of retirement versus annuities, and how to combine investing your retirement with annuities for maximum benefit.

Source: Hargreaves Lansdown Industry Averages, June 8. Common life quotes assume that the spouse is three years younger than the annuity purchaser

Canada Life surveyed a representative sample of nearly 1,000 men and women aged 50 and over about how long they expect to live, using the US life expectancy calculator here.

Nick Flynn, director of retirement income at the company, says, “Longevity risk is the known unknown in retirement planning, but when people underestimate their life expectancy, it opens up another retirement gap.”

He believes that given the significant improvement in rates over the past 18 months, annuities deserve more than a second look.

Source: Canada Life benchmark annuity rates over time, £100,000 purchase price, 10 year guarantee, no health or lifestyle factors. 15-year gilt revenue sourced from ft.com

Retirement firm Just Group says the income available to retirees buying annuities is rising, but warns that the gap between the best and worst rates has been wider than ever for more than four years.

“Switching from the least cost-effective to the most competitive provider can generate nearly 18 percent more revenue, underlining the importance of shopping around,” it says.

‘This equates to a 65-year-old in good health with a £50,000 pension receiving £3,470 per annum (6.94 per cent) income instead of £2,952 (5.9 per cent) – equivalent to more than £500 per annum years for the rest of their lives.

“It’s important that retirees disclose their medical history and lifestyle factors, as that can make a big difference to the level of income offered.”

Source: Just Group’s latest analysis of market rates