A generation of New Centenarians will be forced to work well into their 70s to stay afloat, according to new research we have undertaken for Scottish Widows.
In addition to working longer, the New Centenarians will face a hat-trick of financial pressures as early as their mid-twenties, with the stresses of saving for their first home, student loans, and starting a retirement fund hitting them much earlier than other generations.
The Office for National Statistics assesses that one in three babies born in 2012 in the United Kingdom will live to be 100. This unsurpassed average life expectancy, combined with rising cost of living, education and housing, means that our children will need to plan much earlier for their future and work for longer than ever before.
We have analysed the financial and life milestones that babies born in 2012 will reach before they turn 100. Looking backwards from 2112, our research paints a picture of what life might look like for these babies and examines the steps an average New Centenarian will have taken throughout life in comparison to their parents and grandparents.
Our research found that the New Centenarians will face major financial challenges over their lifetimes, mainly driven by the following:
Unlike previous generations the New Centenarians are likely to start their careers with more much more debt in real and absolute terms than previous generations.
The ratio of first time buyer house prices compared to first time buyer income has increased from 2.35 in the mid 80s to 4.54 about now. This is a major shift which has a working lifetime of implications for disposable income. For the New Centenarians, the trends will continue to be more adverse, driven by a continuing undersupply of housing compared to demand: the excess of demand over supply of housing will ensure that affordability ratios will worsen significantly in future decades.
Retirement and retirement savings
The value of the basic state pension will increase because of the triple lock measures introduced by the previous Government in 2007. But this improvement stands against a sharp fall in participation in private pension schemes and top-ups, plus likely erosion of the value public sector pensions.
Cost of social care
The New Centenarians face the prospect of needing to contribute to the cost of care for older generations.
Of course it’s not all gloom. The New Centenarians will also enjoy significant benefits, especially in terms of increased life expectancy, healthy life expectancy and the advances in technology. But the financial challenges will be very large indeed.