Long life: it might be seen as a blessing, but increasing longevity poses one of the biggest risks to our financial wellbeing.

A person aged 55 today has a one in two chance of living to 90 and a one in four chance of living to 95, according to acturial consultancy Watson Wyatt. By 2010 the number of pensioners will, for the first time, exceed the number of children in the population, according to the Office for National Statistics, and by 2031 there will be 40,000 people aged 100 or over, compared to just 300 in 1951.

This creates a huge issue for retirement savings: there is an estimated 57 billion pound savings gap in the UK and the government has repeatedly warned that people must increasingly shoulder the responsibility of providing for their own retirement.

“The fact is that the UK’s population is growing older by the day: we are all, on average, living longer — and this has alarming consequences for both society and the individual,” says Mike Lake, chief executive of Help the Aged. “More than ever we need to be aware of the implications of living a long life, and a vital part of this is for people to consider their longevity hand-in-hand with their future finances.”

It is exactly this that a new independent, not-for-profit organisation aims to address. The Life Trust Foundation has been formed to act as a central voice and point of education and research into the financial implications of long life. Chaired by Lord Hunt of Wirral, president of the Chartered Insurance Institute, the organisation also boasts Lake, Fay Goddard, deputy director-general of the Association of Independent Financial Advisers, Anna Bradley, chief executive of the National Consumer Council, and Laurence Heyworth, founder and non-executive director of Life Trust Holdings, on its board.

During its first year, the foundation will work with the Institute of Ageing at Oxford University to analyse a wealth of existing information on longevity; bring together people from the worlds of academia, business and charity to debate the issues; and set up a consumer panel of people aged 60 to 85 to help gain and develop insights into the behaviour and attitudes of those in or nearing retirement. It wants to “understand the delicate relationship between money, lifestyle, relationships, health and happiness”.

It is, certainly, a tricky relationship — and one that few are addressing head-on. A fear of finances is creating a “pensions paralysis” among Britain’s over-40s, according to research by Norwich Union. Over a third of those in their 40s admit they have no financial plan for their retirement, and of those who do, the same proportion (37 percent), say they have no idea what their final settlement will be. A lack of understanding and “complicated” products are the biggest barriers to pension planning, the research shows.

The financial services industry has its part to play in helping people understand the options — and the amount of savings necessary for a retirement in which long life does not equal living on the breadline. And, indeed, the financial services industry is slowly responding to the challenges of longevity.

Earlier this year, Life Trust, a newly formed company, launched a new type of financial product, the longevity income plan. Unlike traditional annuities — whereby insurance companies keep any unused capital when a customer dies — Life Trust will redistribute investment fund growth accruing to funds previously held by deceased policyholders to those still alive.  These “birthday units”, coupled with investment returns, which are also calculated to increase each year, lead to a rising income as the policyholder ages.

But consumers, too, must wake up – living longer means a longer retirement. And that heralds a greater need to tackle retirement planning as early as possible.