How long will your pension last? Five tips to maintaining your retirement income

28% of retirees could see their pension fund run out long before they die, according to the Pensions Policy Institute and Legal & General.


There are several major factors which affect how long your pension will last in retirement:

  • How much you take each year
  • How long you will live
  • Investment performance and charges

Life expectancy is the trickiest part of this to calculate, as national averages and calculators can only take you so far. Unless you have a working crystal ball, you won’t know what age you will die until it happens, and by that time, it will be far too late to put a plan in place.

There are many factors which can affect your life expectancy, including your lifestyle, your general health and even your gender and location. Therefore, it is important to have a plan in place which will ensure that you can afford the lifestyle you want, for as long as you need to.

How can you do that?

It all comes down to planning, but there are five key things you can do to make sure that your retirement is as comfortable as possible, whether it lasts 10 years, or 40:

1. Only take a sustainable level of income

Understanding how much you need to live on will help you to strike a balance between your withdrawals and the sustainability of your pension. Know how much you will need to take in income, and whether you will access a lump sum for any reason. Talking to a financial planner or adviser will help you to understand how the two work together and what needs to be done to ensure that your finances are sustainable.

2. Understand life expectancy

There’s no sure-fire way to know exactly how long you will live, but it is possible to make an estimate based on national averages. You will need to factor in your lifestyle, occupation and general health. There are many calculators available to help you with this, including this one from Aviva.

Your plan will need to cover all eventualities; providing an income which will support your lifestyle for as long as you are retired. That means having provisions in place to ensure that you can afford any care you may need in later life.

3. Factor in inflation

Over time, inflation can erode the buying power of your retirement income, especially if you buy a level Annuity, which will not increase each year to keep up with the rising cost of living. That means, to create a sustainable income, you will need to position your money so that it has the opportunity to grow or use products which guarantee that your retirement income will keep up with inflation.

4. Consider the cost of care

Many people assume that their living costs will remain largely flat, or gradually decline, throughout retirement. But, that’s not true for everyone. In fact, most retirees are likely to see their general expenses rise toward later life due to the cost of care.

You will need to think about the type of care you want in later life, as the cost will depend on the intensity of your needs. For example, research from UK Care Guide shows that the average weekly cost of care can range from £250 for basic services, such as occasional home care visits, to more than £1,000 per week for some care homes.

You will need to factor these costs into your retirement planning. Therefore, it will be helpful to talk to a financial planner or adviser who can help you to incorporate the possibility of paying for care, into your financial strategy.

5. Decide what happens when you die

If you are planning for your money to last for the rest of your life, it is likely that there will be some left over when you die.

That means that you need to make decisions about what will happen to that leftover money. That’s where a will comes into play.

If you do not yet have a will in place, this is the sign you have been waiting for that it is now time to write one. If you do have a will in place, that’s great, but your job is not done yet. Take this opportunity to review the will you have in place and make any adjustments that may be needed. Especially if you have started your retirement planning, as it may no longer make sense.

Talking to an adviser or planner can help you to make all these decisions and more. Further still, a professional will be able to apply their skills, experience and expertise to the situation to offer suggestions which you may not have come across previously. To discuss your retirement planning in more detail, please get in touch with us.