Standard Life response to ONS Health Expectancy

Friday, 31 August 2012

The ONS has just released its report on ‘Health Expectancies at birth and age 65 in the United Kingdom’. The main findings of the report are as follows:

• In the UK, males and females can expect to spend more than 80 per cent of their lives in very good or good general health from birth, falling to around 57 per cent at age 65.
   
• Males and females in England can expect to spend the longest periods in very good or good general health and free from a limiting persistent illness or disability. The shortest periods are in Scotland and Northern Ireland.  The proportion of life spent in very good or good general health is increasing in England and Wales but, on the whole, falling in Scotland and Northern Ireland.
   
• The average life expectancy of someone born today in the UK is 78 for men and 82 for women.
   
• Males at age 65 in the UK could expect to live for a further 17.8 years, but only 10.1 years in very good or good general health.
   
• By contrast, females in the UK at age 65 could expect to live for a further 20.4 years on average, but only 11.6 years are likely to be in very good or good general health.

Click the link to view the whole report:

http://www.ons.gov.uk/ons/dcp171778_277684.pdf 

John Lawson, Head of Pension Policy at Standard Life, said: 
  
“The ONS Health Expectation figures bring welcome news that people are living longer and are healthier. However, healthy life expectancy is not improving as quickly as Life expectancy and this has a number of societal impacts. 

"For instance, increases to the state pension age are already in the pipeline, based on increasing life expectancy. But will that still make sense in the future if healthy life expectancy is not keeping pace? If the state pension age reaches 70, then a larger proportion of the population could be claiming incapacity benefit while still of working age. That could increase the costs to the government and could ultimately impact on the level of state pension that is paid. Furthermore, if people want to continue to retire at 65 and enjoy their years of good health, they will have to fund the gap for the years until the later state pension kicks in." 

"People often seem to aim for the same income year on year when they retire. But is that realistic? As this ONS research shows, the average woman will spend about 9 years of their retirement in poor health, while men could spend over 7 years of the retirement in poorer health. People's income requirements change when this occurs. In the early years of ill health, living costs tend to fall because people become less active and more housebound. But when people need personal care or residential care the costs of being ill can rocket. So, for example, assuming illness strikes at 75, then retirement income need might increase by £1000 a year from 65 until 75, then fall by £3000 at 75, finally rising by £15,000 from 80 until death at say age 83. 

"There are many things to consider when planning retirement income that suggest it should seldom be flat. When people first retire, they may want to splash the cash a bit and go on the holiday of a lifetime they have always been promising themselves, move home or buy a new car. They often fund trips and purchases with the cash free lump sum they take out of their pension, but they may also want an increased income for higher expenditure in the initial years too. 

"Fortunately, pensions drawdown has the flexibility to meet all these changing income needs in retirement. But there is perhaps also scope to enable those buying annuities to add some temporary increase to their income level and for a new tax incentive to encourage people to use remaining drawdown funds to fund long term care could make sense." 

For more information and tools to help plan for your future finances, please visit www.yourfuturemoney.co.uk