Independent financial advisers are now planning for their clients to live until 100, but many of us will run out of cash first, warns the Personal Finance Society (PFS).
Life expectancy for men is currently 85.6 years and 88.3 years for women, but it is rising rapidly thanks to medical advances, healthier lifestyles and the decline in smoking.
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PFS chief executive Keith Richards said millions could be left “high and dry”, as their pensions run out early.
“Financial planning used to be based on a typical life expectancy of 80.
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Advisers now base their forecast models on assumptions that people will live much longer lives,” said Richards.
Too many people are accessing their pension pots to finance short-term objectives
He warned that former Chancellor George Osborne’s popular pension freedom reforms, which allow the over-55s to cash in their pots, could backfire in future.
“Too many people are accessing their pension pots to finance short-term objectives such as holidays, cars and helping their children onto the property ladder,” he said.
Far fewer retirees are locking into annuities, which guarantee an income for life no matter how long you live but currently pay record low rates.
Savers who exhaust their pension pots early may fall victim to the Government’s “self-deprivation” rules, added Richards.
“This means that additional state financial support will not be available, leading to misery and hardship.”