One age, very different retirement timelines

Retirement planning often starts with a simple question: when should the retirement journey begin? A key driver of retirement confidence is understanding how long a person is likely to spend in retirement, as this significantly influences planning decisions and outcomes.

The recently published Actuaries Institute's paper - Bridging the Longevity Divide - shows just how different that timeline may be from one person to another. At age 60, the paper identifies an 11.5-year gap in period life expectancy between the most and least advantaged men, and a 9.1-year gap for women. The research draws attention to differences associated with socioeconomic circumstances including income, gender, marital status, home ownership and area-level advantage. 

We asked Phil Dewhurst, CFS Director Retirement Product Solutions, what these findings reveal about the retirement income challenge and the role product providers can play in building a broader range of solutions around the needs advisers see in practice. 

The scale of the difference. An 11.5-year gap for men and a 9.1-year gap for women at age 60 makes the variation in retirement horizons much more tangible. It reinforces that there is no single retirement experience and no single timeframe around which the system can be designed. For product providers, it is easy to focus on the ‘average’ – this paper is a strong reminder that retirement solutions need to accommodate a wider range of circumstances, priorities and possible outcomes. Our solutions need to focus on flexibility and choice – which should enable the planning process to have options to cater for each individual.

Longevity risk is not simply the risk of living longer. It is the uncertainty of how long retirement will last for each individual and what they will need from their savings over that period.

The research adds another layer by showing that this uncertainty is not evenly distributed. A strong retirement system therefore needs to support different starting points and different trade-offs (and associated solutions) between income, flexibility, access to capital, growth and protection. 

Averages are useful for understanding populations, but they can obscure the wide range of individual retirement experiences. Retirement products must remain scalable and sustainable, which means they need to work for a broad cohort of members. However, designing solely for the average can overlook the different outcomes, needs and life expectancies that shape each person's retirement journey.

The challenge for product providers is to balance scale with flexibility. The opportunity is not to create a unique product for every retiree, but to build a broader toolkit of solutions that advisers can tailor to individual circumstances. As the research highlights, retirement horizons can vary significantly, making flexibility across income, growth, capital access and protection essential.

Personalisation does not have to mean more complexity. It can mean providing complementary solutions – where each product has a clear and defined role in the solution, supported by tools and modelling that make trade-offs clear and easy to understand. Due to different retirement horizons some clients may place more weight on dependable income, others on liquidity or growth, and many will need a combination. Our hope is that product design will give advisers practical building blocks they can use within the advice relationship, rather than narrowing the strategy to a single solution. 

Lifetime income solutions can address one of the central uncertainties in retirement by providing income that continues for life – as the Paper outlines – the outcome can be wide and varied in respect of each individuals expected time horizon. 

The role of lifetime income solutions is usually broader than a simple product allocation. They can sit alongside account-based pensions and other assets to combine longevity protection with liquidity, market exposure and flexibility. This lends us to focus on a toolbox of solutions rather than assume one retirement income structure will suit everyone and every retirement plan.

This is what we are focused on building out at CFS.

Retirement Income Optimiser is designed to preserve future choice. It operates while eligible clients continue accumulating and can support a potentially more favourable Purchase Amount calculation if the client later chooses an eligible CFS lifetime pension. It does not require the client to commit to that lifetime income solution today. That combination of future optionality and present-day flexibility reflects the broader direction of our retirement offering.

The ambition is to provide a sufficiently broad and connected retirement offering that advisers can bring together around the needs of each client. That means continuing to build products that address income, longevity, growth and flexibility, while also investing in the modelling, expertise and implementation support that help advisers use those products effectively. We understand that the quality of the outcome depends not only on the product, but on how well it supports the advice relationship around it. 

Ultimately, the paper reminds us that uncertainty is a defining feature of retirement. While averages remain valuable for understanding populations, the findings highlight the importance of recognising the considerable variation that exists beneath them. It is this variation, in longevity, needs and circumstances, that continues to shape how the retirement system evolves.