In the 1930s France built the Maginot Line, a defensive system designed to prevent another invasion from Germany. It was carefully planned and deeply reassuring.

When war came it failed almost entirely. The German army simply went around it. The Maginot Line failed not because it was weak but because it was designed for a future that did not arrive as predicted.

Retirement planning increasingly reflects the same mistake. The pensions system leaves many people underprepared, while also failing to give those who can afford it the confidence to spend. As the goalposts keep moving, caution becomes the rational response and pensioners are not convinced they can afford to spend their money.

We know we’re sitting on a pension time bomb. Warnings from the Pensions Regulator, the Institute for Fiscal Studies (IFS) and successive select committees all point in the same direction: about 15 million people are not on track to achieve an adequate retirement income and many more face shortfalls in later life.

The latest round of government-designed disincentives blows more holes in an already sinking ship. The damage is not just to savings levels, it’s to assurance and the willingness to use money at all. Over time, a system whose rules keep changing has normalised a form of systemic risk aversion, and you can see it in retirement decisions everywhere.

When confidence breaks

Medicine draws a clear distinction between lifespan and health span. One measures how long we live, and the other measures how long we remain mobile, independent and mentally sharp.

In the UK average life expectancy is about 81, while the onset of long-term health limitations typically begins in the early sixties. Data from the Office for National Statistics shows that even among those who reach 65, the remaining years spent in good health average only 10-11. Time is not the scarcest resource, the good years are — and they don’t wait.

Repeated rule changes make spending decisions feel riskier, because people can no longer trust the conditions under which those decisions will be taxed or treated. Delay becomes a form of self-insurance. When the framework feels unstable, doing nothing starts to feel safer than doing something.

IFS research using long-running UK retirement studies shows a growing number of households draw down wealth far more slowly than expected, even when assets comfortably exceed probable needs. Financial Conduct Authority (FCA) retirement income data for 2024–25 shows that while nearly one million pension plans were accessed for the first time and drawdown arrangements increased, many retirees still default to minimal engagement rather than actively spending their pension wealth. This is a pattern consistent with hesitation rather than financial constraint.

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Precautionary paralysis

A pensions system that keeps changing its rules does not just undermine saving, it turns caution into default behaviour. The result is precautionary paralysis. Even those who planned carefully and avoided excess hesitate at the moment those plans are meant to be lived. The trip of a lifetime can wait — yet time keeps moving anyway.

I was once asked by someone approaching retirement: “Which version of me are we actually planning for? The healthy, energetic one or the hypothetical future version who might need everything wrapped in cotton wool?”

Too often, the plan ends up protecting the second version at the expense of the first.

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The sequencing problem

What is rarely acknowledged is that the pension crisis deepens through decumulation inertia — the growing reluctance to use money even when it’s affordable to do so. Planning for longevity does not mean suppressing spending indefinitely, it means aligning spending with means while still protecting income and resilience for later years.

Where affordability is not the constraint, different choices are possible. But instability has trained people to treat caution as a virtue and the cost is not just financial but temporal: they reach later life without the ability to use what has been saved.

The same hesitation extends to inheritance planning. Often, gifting during one’s lifetime would be the rational response, yet unpredictability makes even sensible transfers feel premature.

There is a simple principle this hesitation ignores — the Good Years Rules:

• Protect income for life
• Plan for late-life risks
• Plan spending and gifting around the good years, not the final ones

A significant number could draw more from their pensions and savings without jeopardising long-term security yet they are reluctant to do so. Part of that caution is rational: pensions are often designed first to protect a surviving spouse, so that protection rightly comes before any wider planning.

But beyond that, instability has bred excessive restraint. Even where people understand that unused pension wealth may ultimately be liable for inheritance tax or higher marginal rates when passed on, the fear of getting the timing wrong or another change in the rules keeps money locked away long after it could have been used.

The care-cost trap

Yes, care is expensive. Residential care can easily cost more than £50,000 a year. But this is also where planning often goes wrong: a low-probability, late-life risk dominates decades of earlier decisions because of shifting rules.

ONS data shows that about 3-4 per cent of people aged 65 or more live in residential care at any given time, and most who do so are well into their late eighties. For many, stays are measured in months or a few years rather than long-term.

Long stays do happen. I saw it first-hand when my aunt spent close to a decade in residential care, and when that risk materialises it’s consuming. But planning cannot be built around the most extreme outcomes alone.

Care costs should not be ignored and must be planned deliberately. But planning goes wrong when a low-probability, late-life risk is treated as an inevitability. Care is a serious but bounded risk, one that should be provisioned for, stress-tested and ring-fenced. But it should not lead to indefinite restraint across an entire lifetime.

When money moves too late

Sequencing failure has a predictable outcome. Inheritances now typically arrive at age 60 or later, after mortgages are paid off (or close to it) and children grown. By then, the money is useful but far less transformative than it might have been. It helps at the margins rather than changing outcomes. And increasingly, the amount that arrives will be smaller as the government takes a significant share.

This is what prolonged uncertainty produces. Hesitation. Over time, self-protection replaces planning and money moves later than it could. The price is often paid twice — first in lost opportunity and later in tax. When this behaviour becomes widespread the cost weighs on the economy too.

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Health is capital

For some, the biggest financial mistake is not spending too much. It’s waiting so long to spend that their money outlives the life it was meant for. Longevity matters. But it isn’t the only risk you need to worry about in retirement planning.

Jessica Cook is a partner in a financial planning practice and writes on personal finance