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Full podcast episode transcript
[0:08] Susannah Streeter: Hello and welcome to the Switch Your Money On podcast, with me, Susannah Streeter – Head of Money and Markets here at Hargreaves Lansdown.
[0:14] Sarah Coles: And me, Sarah Coles – Head of Personal Finance.
[0:16] Susannah Streeter: Great to be here – and I know that you have been blowing up lots of balloons over the past couple of weeks, Sarah. I hope you’ve got your breath back because it has been, recently, our 100th anniversary – we’ve had 100 episodes. Because of this, we thought – for our ‘Personal Finance Special’ podcast – we would look at whether you can afford to live to 100. Find out how much is enough – and just how you can tell.
[0:41] Sarah Coles: Yes – so we’ll have Helen Morrissey here – our Head of Retirement Analysis – who’s all things pensions – so she’ll be able to take us through what it means for your pension – and also Bradley Clark – our Financial Planner from HL – who’s gonna talk a bit more about how to plan, so that, no matter how long you last, your money’s gonna keep up with you.
[0:56] Susannah Streeter: Great to have you both with us.
[0:57] Helen Morrissey: Thank you!
[0:58] Bradley Clark: Thank you!
[0:59] Sarah Coles: So, one of the reasons that we wanted to talk about this is because, very commonly, people do underestimate how long they live for. So, they tend to look ahead to their grandparents – and they think, ‘Oh, my grandparents lived to 79 – I’ll probably live that long as well’ – and forget that longevity has actually been improving over time.
If you look, for example, at the number of people who live to 90 and over – which is a great age... Go back to 2003, the number of men who live to that age have doubled and the number of women who live to that age are up by a third. So, there’s a decent chance you’re gonna make your 90th year, so look forward to blowing out all those candles as well as blowing up all those balloons!
There’s a big question about how much money you need to have and how to plan how you’re gonna spend it, so you don’t go too far one way or the other. The buzzword that the industry uses is ‘Adequacy.’ Good time to bring in Helen, who talks buzzwords all the time, ...
[1:47] Helen Morrissey: [Laughs]
[1:47] Sarah Coles: ...but can you just explain what this actually means?!
[1:49] Helen Morrissey: Put simply, the whole ‘Adequacy’ thing is, ‘Do you have enough to support your lifestyle throughout your retirement?’ – and that could be a very long time – as you say, you could live to 90 – could live to 100. It’s making sure that you’ve got enough to meet your lifestyle – and people’s lifestyles will be very different, depending on the person. And the whole issue of people having enough in retirement is something that we talk about, as an industry, an awful lot. And we’re gonna be talking about it a lot more because the Government is doing a pension review – which is ongoing at the moment. The second phase of that is about to kick off, and that is gonna be all about this whole issue of adequacy – ‘Are the things that we’ve put into place – like auto-enrolment, State Pension... are they going to work well enough to give people enough to give them a good income in retirement?’
[2:40] Sarah Coles: So, how do you work out how much ‘Enough’ is – and what process have you been through?
[2:44] Helen Morrissey: As you say, we’ve recently launched a report, using our HL Savings and Resilience Barometer. It’s probably the question I get asked most – ‘How much do I need to save to retire?’ – and we’ve looked at various different measures that people use to try and work that out.
So, first of all, we’ve got the Pension and Lifetime Savings Association’s Retirement Living Standards. Now, these get quoted a lot in the press – and they try and put a pounds-and-pence figure on what they call the minimum, moderate, and comfortable standard of living in retirement for both singles and couples.
The second one is ‘The Living Pension,’ which comes from The Living Wage Foundation – and that’s like a minimum, covering people’s everyday needs for singles and couples.
Then, we’ve got Target Replacement Rates, which many people may well have heard of – and it’s about trying to target a percentage of your income that you had while you were working. So, you might say that you want to save enough to give yourself two-thirds of the income in retirement that you had when you were working.
And then, finally, was our own measure, which is called ‘Current Retiree Expenditure,’ which is the spending of today’s retirees – taking on board things like their income, their relationship status, whether they’re renters, homeowners. So, there’s many different ways of looking at ‘Adequacy.’
[4:04] Susannah Streeter: And that does really beg the question, ‘Why can’t we just have one overall standard – and then, what should be in that overall standard?’
[4:12] Helen Morrissey: It’s a really great question – ‘cause, at the end of the day, what is adequate for you in retirement might not be adequate for me.
[4:19] Susannah Streeter: You don’t like [inaudible 4:20]
[Over speaking 4:20]
[4:20] Helen Morrissey: We might have different ideas on holidays – all kinds of things – and you’ve gotta try and take those on board. So, they work differently – and they give very different pictures.
For instance, if we look at Target Replacement Rates... 55% of households would be on track for an adequate pension income if you use these Target Replacement Rates. Whereas, if you looked at it under the Living Pension scope, that goes right up to 79% of households being on track – so it’s very different.
[4:20] Sarah Coles: So, if you’ve got the Living Pension – where lots of people seem to be doing fine according to Living Pension... will it be easy just to say, ‘Well, let’s just all aim for that then, and then we’re okay?’
[4:57] Helen Morrissey: I mean, there’s something to be said for that, but it does need to reflect individual’s needs – so the fact that my idea of retirement might be very different to Susannah’s, yours – Bradley – and the key thing is that we don’t want any nasty surprises.
It’s like, if you were a higher earner and you were being told you’re on track for a decent retirement income – and all you’ve been targeting is the Living Pension... you might get to retirement and find that you’ve gotta make massive changes in your lifestyle.
Similarly, if you are on a lower income – and you’re being given a higher target – you might, potentially, stress yourself out, over-save into your pension, and leave yourself struggling in the day-to-day.
[5:38] Sarah Coles: So, I’m hoping that you’re gonna tell me that you’ve found the perfect answer... that there is one solution – and that the report came up with the answer that everyone’s been looking for.
[5:45] Helen Morrissey: Not quite, unfortunately. What we’ve found is that we can’t put one definitive standard on pension-adequacy, so we’ve gone for two. There needs to be a minimum flaw – and so, with that, we’ve gone for the Living Pension... that should be used as an underpin for the minimum that people should have – and then you need a bit of flexibility in there to take account of people’s different living standards and expectations. And so, we believe that the Target Replacement Rates are the best thing to build on this.
So, for instance, if you had a Target Replacement Rate of two-thirds... that would be someone who, maybe when they were working, was on £30,000 a year. If they were targeting two-thirds of that, they’d need a retirement income of £20,000 per year in retirement – and that would include things like the State Pension. Whereas, somebody on £100,000 while they were working... if they were targeting 66%, that would be £66,000. So, they either would need to save more – that would be more in-keeping with the living standard that they were used to throughout their working lives.
So, basically, the aim is that there is less over-saving going on – and then also less nasty surprises when people get to retirement.
[6:57] Sarah Coles: And it is worth saying, of course, that a Target Replacement Rate isn’t necessarily two-thirds. It’s a great example to use, but it can vary.
[7:03] Helen Morrissey: Absolutely – it can completely vary. There’s something to be said for people who are on those higher incomes actually targeting something closer to 50%.
[7:11] Sarah Coles: So, then, if you’re gonna translate this into how things work for people at the moment... I’m guessing that the State Pension – and your auto-enrolment minimums... they go quite a long way towards the Living Pension?
[7:19] Helen Morrissey: Yeah – so one of the big discussions in the industry at the moment is the level of the State Pension – you know, ‘Should the triple lock still be going?’ – ‘What should we do about auto-enrolment minimum contributions?’ – ‘Should we be raising them?’
Well, as you say, we find that lower earners could, effectively, hit their targets with a full State Pension – as it currently stands – and with contributions at those current minimums – so that could work for quite a lot of people. So, ‘is there really an argument for those auto-enrolment minimums to be going up across the board?’ You know, ‘Would it be better for those higher earners, who need to save more to hit those higher targets... Can we look at how they can be incentivised to boost their contributions over and above those minimum standards – but, actually, if those other people that are still doing okay... not putting the pressure on them to also do it?’
[8:10] Sarah Coles: Sounds like a really useful way to get started – if you’re thinking about, ‘How much is enough?’ – definitely. And, whenever we talk about pensions, we
need to talk about the age limit that applies when you want to take your pension.
[8:20] Helen Morrissey: Absolutely, Sarah. As we say, you can’t currently access your pension until at least the age of 55 – that’s going up to 57 in 2028.
[8:28] Sarah Coles: And, of course, it’s also worth saying that, if you need a bit of guidance on this, then there is a government support there for you.
[8:33] Helen Morrissey: There absolutely is. There’s several things that you can do – there’s independent financial advice – your pension provider can also offer you a lot of educational materials. There is also the government-backed Pension Wise, which is a guidance service.
[8:46] Sarah Coles: Brilliant to talk to you, as ever. As you mentioned retirement and advice, a really good time to bring in Bradley.
Bradley, I guess, when you’re working with clients, big part of the process is working out what they need?
[8:55] Bradley Clark: It is – and I think one of the real benefits of advice is that I can spend time really getting to know my client – and being very specific about what they want their retirement lifestyle to look like – how many holidays they wanna go on – how much they wanna give to the grandchildren – and really understand what it is they’re looking to do, so we can use a specific figure. Then, what we can do is look at the assets that client has built up – pensions, ISAs, whatever it might be – property – and we can look at the various income streams they’ve got coming. And that enables us to build up a really clear picture as to what this client is looking for – and what we’ve got in place to try and achieve those goals.
[9:31] Sarah Coles: And, presumably, as part of that, you work out how long they’re likely to live – which probably sounds like quite a scary thing to say to somebody!
[9:36] Bradley Clark: [Laughs] It is – and life expectancy is the big unknown. It’s a bit of a paradox in financial advice – in that a lot of people see living to your late-90s – even to age 100 – as a really good thing – whereas, in advice, we see that as a risk. We call it ‘Longevity risk.’
And so, when I’m looking at that for a client, we’ll use data from the Office for National Statistics, and they will tell us what a client’s one-in-10 chance of how long they may live for. So, for most clients who I work with, that will be into their late-90s – so what we do is, we try and build plans that put them in a position where they’ll be financially secure on the basis that they do live to their late-90s.
[10:14] Sarah Coles: One of the questions is... how accurate you can actually be when you’re making those sorts of assumptions.
[10:20] Bradley Clark: Yes – and, because we know a lot about this client – we’ve done that work in understanding who they are and what they want their lifestyle to look like – and we know what assets they’ve got... we can use modelling software, where we can input all of this data into a piece of software – and that will then project that client’s financial future, using assumptions, and enable us to plan with quite a high degree of certainty as to how things may play out. And that modelling software enables us to then make decisions today on how much you might spend – and how long you may live for – and what you need – to then work out what the plan should be when it comes to using those assets that you’ve built up.
One of the things that we can do – particularly in this day and age.. a lot of retirement plans, we built on investments – investments within pensions, ISAs within drawdown. So, investment risk is a key thing – and what we can do with this software is... we can model a market crash, for example. So, ‘What would the impact be on this plan if the markets were to fall 35% in one year?’ – and, when that crash happens can have an impact as well. If it happens really early on in your plan, ‘How’s that going to impact you later on in life?’ If it happens in 10 years’ time, that’s when you’re spending less – then, ‘How’s that gonna impact you there?’ And we can see things such as, ‘How hard d’you need your investments to work?’ What percentage returns you need each year to be able to sustain the lifestyle that you want – and we can also look at, ‘How much can you afford to lose in a market drawdown?’ – that gives us insight into your capacity for loss as well. ‘How much risk can you afford to take on before this might be a problem in the long run?’
[11:52] Sarah Coles: One of the things I wanted to ask you about was health – and I realise I’m focusing very much on the uncertainty and the negatives here, but health is a really big deal in retirement, isn’t it?
So, when we talk about life expectancy, people just think that they’ll be healthy forever, but we do know that life expectancy means, actually... really, in their early-60s, people will start to suffer from conditions. So, how d’you actually deal with the issue of health?
[12:14] Bradley Clark: It’s a big topic in and of itself – and I think the first thing is to understand that life expectancy is important too to understand, but health expectancy is perhaps equally important. This is how long you have in your life where you have full health. It could be that, between the age of 70 and maybe 85 or 90, you’re still alive, but your health isn’t as good as it was – and, therefore, your health expectancy isn’t as long as your life expectancy – and we can plan for this.
So, what I see with a lot of clients is that, in that period between age 55 and 70, you have the excellent combination of health and wealth. You have all the money that you’ve built up over your working life – now you’ve got the time to go and enjoy it – and you’ve got the health to enjoy it as well – however, maybe from 70 or 80 onwards, your health isn’t enabling you to live that lifestyle, but you’re still living independently.
So, this is where we see that U-shaped retirements, where you may spend lots in the early years, but then you’ll have a period of time where you’re not spending as much before perhaps you need extra care later in life, so you end up seeing this U-shaped retirement.
One of the great things about financial advice is that we can model these different scenarios. We can make sure that, if there is a need for care at the end – and there’s a big outlay in terms of capital... that you’ve got that money there, so that that scenario is covered.
And one thing that I talk about with clients – particularly after the Budget – which we had fairly recently in October last year... inheritance tax is on the mind of a lot of clients. And that means that they’re talking about giving assets away because they don’t wanna face an inheritance tax bill – but there is a risk that you give away capital – or assets that you’ve got whilst you’re in good health – and you think that’s gonna continue forever – and then, if your health does change and you do need access to capital later on... well, if you’ve given it away, then you’re gonna be in a sticky situation. So, the modelling that we do enables us to just sense-check whether giving money away now is the right thing to do, or perhaps you do need to hold something back.
[14:10] Sarah Coles: One more thing I wanted to ask you about is how you tailor things depending on how people are taking their income – ‘cause, presumably, if somebody who’s bought income for life through an annuity... in completely different position to someone who’s in income drawdown – and is investing, and then taking money from those investments?
[14:25] Bradley Clark: Yeah – so understanding how much you might need in retirement is, of course, very important – and very hard to do – as we’ve been talking about – but how you take that income is equally important and an entire discussion on its own.
So, it’s really about making sure that you have the right option that’s right for you at that time.
[14:41] Sarah Coles: Oh, that’s fantastic. Thank you so much, Bradley – it’s always great talking to you about this and getting some insight into how things work with clients.
So, that’s almost all for now, but we do have time for our fact of the week – and this one is all about living longer.
So, I want you to tell me... which of these celebrities lived to 100?
Was it Kirk Douglas?
Was it Dick Van Dyke?
Or was it Clint Eastwood?
[15:01] Susannah Streeter: Actually, it’s Dick Van Dyke.
[15:03] Sarah Coles: [Laughs]
[15:03] Susannah Streeter: I don’t know why I think that, but he’s just been around for so long – and in so many reincarnations on screen – so I’m gonna go for him.
[15:13] Sarah Coles: Yeah – he’s great for his age as well – saw him dancing...
[15:15] Susannah Streeter: Mm!
[15:15] Sarah Coles: ...the other day – so that’s quite fun]. What d’you think, Helen?
[15:17] Helen Morrissey: It’s a tough one – because, as you say, Dick Van Dyke has been around very long time – and I think, if he’s not hit 100, he’s gotta have been pretty close to it. Same with Clint Eastwood – I think Clint Eastwood’s over 90 – but I do think the ‘Magic 100’ is Kirk Douglas.
[15:36] Sarah Coles: And what d’you think Bradley?
[15:38] Bradley Clark: I’m a bit of a film buff, so I know the answer already to this one. I know that...
[15:42] Susannah Streeter: Go on then!
[15:42] Bradley Clark: ...Kirk Douglas lived to 103 – ...
[15:45] Susannah Streeter: Okay!
[15:45] Bradley Clark: ...and he passed away in 2020, I believe.
[15:47] Sarah Coles: That’s exactly right – and the other two still got a chance to live to 100.
[15:50] Susannah Streeter: Well, what a great way to round off the podcast.
Bradley, I’m a bit nervous now because you being here most weeks means that Helen and I have got a lot of competition.
[15:59] Bradley Clark: [Laughs]
[16:00] Susannah Streeter: So, before we go, we do have to tell you that this was recorded on 30th June 2025 and all information was correct at the time of recording.
[16:08] Sarah Coles: Nothing in this podcast is personal advice – you should seek advice if you’re not sure what’s right for you. Pension rules can change and benefits depend on individual circumstances.
[16:15] Susannah Streeter: So, all that’s left is for us to thank our guests: Bradley, Helen, and our Producer, Elizabeth Hotson.
Thank you very much for listening – we’ll be back again soon with the Investment podcast. Goodbye!
[16:25] Sarah Coles: Goodbye!
[16:26] Bradley Clark: Goodbye!
[16:27] Helen Morrissey: Goodbye!