Pension planning: how long have I got left?

TV DOCUMENTARIES about long-lived people are popular with older viewers. We hope tips revealed by Okinawan or Sardinian seniors might help us live longer ourselves (purple sweet potatoes, anyone?).

But there is a bitter irony to Secrets of the Superagers, currently airing on Channel 4 in the UK. The series, recorded in 2023, has outlasted its presenter, Dr Michael Mosley. Sadly, this agreeable advocate of healthy living died last year at the age of 67.

He has entered that strange Valhalla of people “called before their time”, as my granny would have put it. These outliers can distort our perceptions of how long our own lifespans might be. This may, in turn, complicate our pension planning.

It is easy enough to tot up our assets as we head towards retirement and beyond. But will they allow us to live comfortably until the moment when all financial planning instantly becomes superfluous? A further peril may be a hefty inheritance tax bill for heirs.

People often underestimate their likely longevity because of the narrative power of outliers such as Dr Mosley. “An individual dying prematurely is an ‘event’. Living a bit longer than the average is not,” says Ross Murray of Hymans Robertson, an actuarial consultancy.

There are outliers at the other end of the scale, of course – I dimly recall reading an article about one feisty Nepali centenarian who credited his years to the consumption of yak butter and cigarettes.

If these veterans have less sway in our thinking, it may be because family history encourages underestimates. “Your grandparents might have died in their late seventies,” says Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, an investment services group. “But in recent years we have seen big increases in longevity.”

This is partly why the UK’s Office for National Statistics (ONS) – conscious, no doubt, of the welfare costs of underfunded retirements – provides Britons with a no-frills life expectancy calculator. A slightly fancier online number cruncher is available to Americans, courtesy of two US actuarial bodies. (Singapore’s Department of Statistics website also has one, providing an estimate based on age and sex against local data.)

These calculators tell you what the average life expectancy is for someone of your age and gender. I am 61. The ONS gives me even odds of eventually blowing out 84 candles on a birthday cake. If I were female, the figure would rise to 87.

Such ready reckoners generally spit out “average cohort life expectancies”. These allow for the likelihood that medical advances will increase survival rates.

I am something of a flat-earther here. Scientific progress occurs in bunny hops, I believe. It is not a smooth glide. I therefore also consider “period life expectancy”, which represents unadjusted historic mortality. These estimates shave a year or two from the life expectancy of folks in their sixties. The gap dwindles to nothing as pensioners get into their nineties.

There are a bunch of longevity calculators that ask users to input more detailed data. A good education, higher income and decent health are interlinked factors that increase predicted mean lifespans.

But these calculators can set up a cognitive trap for users, in my view, albeit unintentionally. You may easily delude yourself into thinking their precise questions give you a more accurate answer.

One such calculator tells me with a wink that I can expect to curl up my toes on Thursday, May 14, 2054, when I am 89. Great. So far, I have no appointments that day I would need to cancel.

The reality is more nebulous. First, the only thing the estimate tells me is that an average person with some of my characteristics has a 50 per cent chance of reaching 89. He could easily die long before or after that.

Second, smoothly rising averages are calculated from large data sets of lifespans. These are highly random at an individual level. Finnish researchers found, for example, that personal variables explained only 15 per cent of the differences between individual longevities. The remainder was accounted for by the rolling of cosmic dice.

An old City joke applies, with due apologies to inhabitants of an Italian island with a history of gangland hits: a British actuary can tell you when the average person will die, but only a Sicilian actuary can tell you his name and address too.

My decumulation assumptions are suitably provisional. They are bracketed between my current age and 92, which I have a one in four probability of reaching, according to ONS.

If I am still alive after that, I plan to sit in an armchair grumbling about “the young people” – reckless, feckless septuagenarians – while costing an annuity company a lot more money than it initially bargained for.

Longevity fog has its silver linings. First, the life expectancy of your age cohort soars for every year that you survive and less fortunate counterparts fall out of the sample. Second, “healthy” life expectancy rolls forward in a similarly progressive way, according to ONS data.

Most importantly, not knowing when we will be going saves us from the dread, pride or envy that accurate knowledge might inspire. Very old people sometimes remark that each extra day feels like a bonus. That is a good attitude to have earlier too.

Fate sometimes provides a heftier nudge than the premature demise of a TV presenter. One day in 1993, a call from a client delayed an acquaintance of mine on his way to lunch. As a result, my friend was not among the 84 people who died on the lower floors of his workplace, the Bombay Stock Exchange, when a bomb exploded at 1.30 pm.

A doctor subsequently told him a medical condition would kill him within a year. That was 20 years ago. He now works in retirement planning.

The writer is an adviser and a former head of Lex