How to boost your retirement finances as more people set to live to 100 years old
Later-life planning is more important than ever, with 19% of girls and 12% of boys born in 2024 expected to live to 100, according to the Office for National Statistics.
Becoming a centenarian used to be a rare occurrence, but joining the 100 club will become increasingly common in the future, data suggests.
A fifth (19.1%) of girls and a tenth of (12%) boys born in 2024 are expected to live past 99, according to the latest data from the Office for National Statistics (ONS).
This is expected to rise to 26.3% of girls and 18.3% of boys born in 2049. Meanwhile, a girl born in the UK in 2024 has a life expectancy of 90.2 years and boys 86.9, but by 2049 this is forecast to reach 92.4 and 89.6 years respectively.
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Later life outcomes are rising for older people too. Women reaching 65 in 2024 can expect to live another 22.7 years while men of the same age will live for another 20 years on average. This is up from 20.4 for women and 17.6 for men turning 65 in 1999, the data from the ONS shows.
But with later life expectancy comes the burden of funding retirement for longer.
Sarah Coles, head of personal finance at investment platform AJ Bell, said: “For retirement, the great unknown is how long we can expect to live.”
In this guide, we look at how you can boost your retirement cash pot and cover care costs in later life.
How to future-proof your retirement and boost your pot
A good start is using the ONS’s life expectancy calculator, which gives you a rough estimate of what age you might live to based on your age and gender.
For example, under current forecasts, a 45-year-old woman is expected to live to 87, according to the calculator. A 55-year-old man is forecast to live to 84.
It’s also worth using a pension calculator to get a forecast of the likely pension income you’ll have in retirement.
MoneyHelper’s calculator asks you questions about your gender, age, current income and when you want to retire, as well as your current workplace and private pension contributions, to tell you if you’re on track to hit a desired yearly retirement income.
If you find you’re coming up short, there are steps you can take to boost your pot.
Increasing pension contributions
Increasing your pension contributions is one of the most effective ways to boost your retirement pot, especially if you start early, allowing for savings to compound.
You can add more to a private pension like a SIPP or contribute more to a workplace pension.
The current minimum contribution to a workplace pension under auto-enrolment rules is 8%, made up of 5% from your wages and 3% on top from your employer, but you can increase these contributions.
Money added to a pension will benefit from tax relief from the government too, extra money you would have paid in tax which is added to your pension instead.
Adam Cole, retirement specialist at wealth management firm Quilter, said: “The most effective step (for boosting pension pots) remains increasing pension contributions early, even modestly, as time and compound growth do most of the heavy lifting.
“Many people still anchor contributions to minimum (8%) auto-enrolment levels, which are unlikely to produce a large enough pot to support a comfortable retirement.”
You can also sign up to a pension salary sacrifice scheme with your employer, which could reduce your overall income tax and National Insurance burden.
Review default workplace pension funds
When you’re auto-enrolled into a workplace pension, you’ll be put into a default fund, meaning your contributions are invested and managed for you.
Nest, a major UK workplace pension provider, says 99% of its 14 million members are in a default fund.
However, if your default fund doesn’t match your risk appetite, you could move away from it and into another riskier fund with potential to offer better returns.
Do note, switching out of a default fund will mean you have to take on more of an active role in managing your pension, and your pot could end up worse off than if you’d left it in the default fund.
Make sure you’re set for a full state pension
You need 35 years worth of National Insurance contributions (NICs) to receive a full new state pension, worth £241.30 a week as of 2026/27. You need at least 10 years of NICs to receive any new state pension.
However, you may not have enough qualifying years to receive the state pension you want, for example if you took time out of work to look after children or to care for a loved one.
You can use the government’s tool to find out how much state pension you’re on track for. If you’re not set to get the amount you want, you might be able to claim free National Insurance credits or you can top up your NI record by paying for voluntary NICs.
Do note, the state pension age is rising from 66 to 67 between 2026 and 2028 and from 67 to 68 between 2044 and 2046 meaning you'll have to wait longer to claim it. It could rise further in the future due to rising life expectancies.
How to cover care costs in retirement
Care can be a significant outgoing later on in retirement, but there are ways to help fund it or cut costs. One of the main ways is an immediate needs annuity.
Immediate needs annuity
If you don’t qualify for any free help through the NHS, you could buy an immediate needs annuity to cover the cost of care.
You typically buy one through a lump-sum payment, with any income paid directly to the care provider tax-free.
Some plans will also increase the value of payments over time to keep up with inflation.
Emma Walker, director of retirement firm Just Group, said: “An immediate needs annuity can take away the risk of seeing nearly all the elderly person’s assets from being swallowed up by care costs if they do end up needing an extended period of care.
“There is no investment risk and securing a flow of sufficient income by paying the annuity premium can effectively protect the remaining value of the estate.”
You can also buy deferred needs care annuities, which start paying out months or years into the future when you might expect to be needing care.
Deferred needs care annuities can be cheaper than immediate needs annuities because you’re older when they're triggered.
Meanwhile, locking in a rate earlier can lead to higher payments if annuity rates drop later on.
We look at how you can use equity release to cover care costs in another article.
