Increasing life expectancy will require larger pensions for the future. #pensions #ukpensions #pensiontransfer #retiringabroad #IN
13 Tuesday Nov 2012
MORE than a third of babies born this year are expected to live to 100 — but, according to a bleak forecast of their prospects, they may end up cursing a life lived in slow motion.
Newborn children are likely to be paying off their student loan until 52, their mortgage until 61, and have to remain in work until 70.
Baroness Sally Greengross, chief executive of the International Longevity Centre UK, said: “With the prospect of living to a great age, people are going to have to recalibrate, and elongate all the life stages.”
Iain McGowan, head of investment propositions at Scottish Widows, which commissioned the study, New Centenarians, warned: “While people will live longer in good health, they will be worse off and have to be more patient than in the past. Everything will take longer.”
He conceded that economic forecasting was uncertain but said: “People will be worse off because they will have to commit more to pay off debt and to save for retirement than in the past.
“They will be starting families later, and will have to adjust to the quantum they have to save — it may involve putting by a quarter of their salary.”
He pointed out that new centenarians will have to fund a retirement of 30 years or more, with some even living to the age of 120.
Newborn babies will be worse off than their parents (born in 1983) or their grandparents (born in 1957) according to a series of measures. For the grandparents of the new centenarians a university education was in effect free with no tuition fees, and grants to cover living expenses. The parents of new centenarians borrowed £8,700 and were paying off the debt until age 33. But the child of 2012 will start their career indebted to the tune of £73,000 and take until age 52 to pay it off.
Grandparents paid off the mortgage by 54, parents by 57, yet the centenarians will take until 61. If they want to retire on 60% of their final salary they will need to accumulate a pension pot of £2.4m, compared with £1m for those born in 1983.
The gap between generations will also continue to widen, rising from 26 to 29, and then 31 for the age of having one’s first child. While the grandparents’ generation married on average at age 25, in the early 1980s, this is predicted to rise to 31 for their parents, and to 33 for those born this year.
On a more positive note, babies born today will earn a starting salary of £57,000 — worth £32,500 in today’s terms. An estimated 33.3% will reach 100, up from 19.5% of their parents, and 12.3% of their grandparents.
Luke Alexander, 28, a digital consultant living in Stratford, east London, remained upbeat about the life in store for his daughter, Phoebe, born in June. “Life is becoming more complex, but each generation has more opportunities,” he said.