Savers to outlive retirement funds by a decade

Retirement savers in the UK are expected to outlive their savings by over a decade, according to new research from the World Economic Forum (WEF).

In its Investing in out Future Report 2019 published yesterday (13 June), WEF found than men will outlive their savings by 10.3 years, while women will on average live 12.6 years past their savings, with average savings for both expected to last around 8.5 years.

The analysis, which examines the average savings at retirement and calculates how long that would last on a reduced income of 70 per cent, found that women were at more of a disadvantage due to their life expectancy.

The report, which assessed retirement income across six countries, said that a new solution which provided spending flexibility is needed.

According to the research, overall spending declines with age on a real dollar basis, however, there is a spending surge leading up to retirement which can “ravage a portfolio” due to its interaction with sequencing risk of return.

Retirees also faced spending volatility when transitioning into retirement, with 80 per cent experiencing substantial changes in spending.

Furthermore, the WEF said that the array of products and services can be overwhelming for those facing decumulation, with people likely to “switch off” and defer decision making or choose the “path of least resistance”.

It added that dashboard reporting could make a “significant” difference to savers, but that “having several different providers using different economic assumptions could confuse individuals if they see lots of different projected outcomes, once again adding to the complexity of retirement planning”.

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