Most people plan for a retirement that’s shorter than the one they’ll actually have.
ONS data puts current UK life expectancy at around 79 for men and 83 for women, but those are averages. A 65-year-old today has, on average, more than 20 years ahead of them. Roughly one in four will live past 90. Roughly one in ten will see 95. Plan around the average and there’s still a one in two chance of outliving it.
That’s longevity risk: needing your pension for longer than your pension was built for.
Why retirements keep getting longer
- Life expectancy is still drifting upwards, especially for higher earners. The gap between the longest and shortest-lived deciles in the UK is now over a decade.
- More people are stepping back at or before 60, which stretches the drawdown period at the front end.
- “Retirement” itself has changed: fewer hard stops, more sliding scales of part-time work, sabbaticals and full retirement, often spanning decades.
- Couples should plan around the longer of the two lives, not the average. For a couple both aged 65, the chance that at least one of them reaches 90 is materially higher than for either individual.
A plan designed for a 15-year retirement is the wrong tool for a 30-year one.
Why this is the risk that multiplies the others
Longevity quietly amplifies everything else.
- Inflation has 30 years to compound, not 15. Industry modelling suggests retirees may need an extra £90,000 in their pot just to absorb recent inflation over a 20-year retirement. Stretch that to 30 years and the gap widens further.
- Sequencing risk matters more, because a bad early decade has longer to do damage.
- Personal events like health changes, family support or career shifts become statistically more likely the longer the retirement runs.
- Care costs typically arrive late, when the pot has often shrunk the most.
Plan for a long retirement and the other risks get easier to handle. Plan for a short one and you stack the deck against yourself.
What a sustainable plan tends to look like
A few principles repeated across most mainstream UK retirement research:
- Start with a sustainable withdrawal rate. Many investors anchor to something around 3.5% to 4% of the initial pot, adjusted for inflation. It isn’t a guarantee, but it’s a sensible starting frame for a 30-year horizon.
- Be willing to flex. Static “pound-plus-inflation” withdrawals are less reliable than dynamic withdrawals that respond to how markets actually do. The willingness to take a touch less in tough years is what makes the rest of the plan robust.
- Keep a portion in growth assets, even in retirement. A 70-year-old still has a slice of their pot with a 20-year horizon. That money belongs in real assets, not cash.
- Use the State Pension as a base layer. It isn’t enough to live on by itself, but its inflation-linked, lifelong nature means the rest of the plan can take a bit more risk.
How a SIPP can help
A SIPP suits long retirements because it doesn’t force you into permanent decisions.
- Stay invested for growth. A SIPP lets the long portion of your pot keep working in equities rather than sitting idle in cash.
- Tune your drawdown rate. Year by year, in response to markets and to life. Fixed annuities don’t offer that.
- Keep contributing while you can. Tax relief makes pension contributions an outsized win. The bigger the pot at 65, the more comfortable the maths from 85 onwards. Carry-forward rules also let you make use of unused allowances from the previous three tax years.
- Combine with an annuity if you want a floor. Many investors use a small annuity for essential bills and a SIPP in drawdown for the rest. You don’t have to choose one or the other.
- Build in a legacy. Under current rules, SIPPs can usually pass to beneficiaries, often outside the estate for inheritance tax. The government has signalled changes here from April 2027, so this is worth keeping an eye on, but the underlying flexibility remains.
In short
Assume a longer retirement than you expect. Fund it accordingly. Keep enough invested for growth to last the distance. A SIPP is one of the few wrappers genuinely built for retirements measured in decades.
Important information
Capital at risk. The value of your investments can go down as well as up, and you may get back less than you put in.
Tax treatment depends on individual circumstances and is subject to change. ETF costs also apply.
This content is for information only and is not financial advice. If in doubt you may wish to consult a professional adviser for guidance.