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Latest figures show reverse trend in UK longevity 

17 March 2019

The latest life expectancy figures from the Continuous Mortality Institute (CMI) have revealed a reverse trend in UK longevity.

According to the revised figures, life expectancy in England and Wales has fallen by around six months, marking the biggest decrease on record.

Men now aged 65 can expect to die at 86.9 years, down from the previous 87.4 years. Women are expected to live until the age of 89.2 years, down from 89.7 years.

The CMI model estimates current mortality improvements by smoothing historical mortality rates, with the latest version using data from 1978-2018. It has also adjusted its model to place more weight on the lower mortality improvements in recent years.

Tim Gordon, chair, CMI Mortality Projections Committee, said: “The causes of the slowdown, and whether these current low improvements will persist, remain a subject of considerable debate. The CMI 2018 model itself reflects increasing evidence that the lower level of improvements may be due to medium or long-term influences, rather than just short-term volatility.”

Herschel Mayers, CEO of VitalityLife and VitalityInvest, commented: “This report reinforces the trend that we are reaching later life in poorer health, due to our unhealthy lifestyles. When it comes to later life, many don’t take steps to arrive there in good health and we also know many don’t start saving enough, meaning they cannot make the most of their retirement. It’s clear that more needs to be done to address these challenges and to encourage a change in behaviour towards savings and wellness.

Pension provisions 

Steven Cameron, pensions director at Aegon, said that despite the decrease in life expectancy, retirement needs must continue to be at the forefront of people’s minds.

He explained: “The decline in defined benefit pensions means people are no longer guaranteed a pension income for life other than the state pension. Under pension freedoms, people are increasingly choosing flexibility but in doing so taking on responsibility for using their pension pot across an unknown future lifespan. Taken together, it means people more than ever before need a realistic understanding of how long their retirement may last and many will benefit from seeking advice.”

Retirement specialist Aon said it expects use of the CMI’s latest model to lead to a reduction of around 2.5% in the liabilities of a typical UK pension scheme.

Matthew Fletcher, senior longevity consultant at Aon, said: “While the pensions industry still expects mortality rates to improve, the new model reflects the growing evidence that these improvements are likely to be slower in the near term than the historically high rates seen in the years up to 2011. The CMI model is based on data across the whole population but we are often trying to estimate life expectancies for a sub-population – for example members of defined benefit pension schemes where evidence suggests that mortality improvements may have been higher than across the broader population.

Fletcher said Aon was pleased by the CMI adding the facility to increase or decrease initial rates of improvement more easily, which “should allow actuaries a more straightforward way to explain any adjustments they are making to the model to reflect improvements for sub-populations.”

Pensions expert AJ Bell made the point that if the slowdown in life expectancy improvements were to continue over a longer period of time it could have profound implications both for individuals and society as a whole.

Tom Selby, senior analyst at AJ Bell, commented that it was “somewhat ironic” that this latest downgrade in life expectancy projections comes just as the first increase in the state pension age came into force. “If life expectancy improvements stall or even go into decline, questions about whether future increases in the state pension age should be implemented will inevitably grow louder,” he said.

This month marks the first since WWII where people have had to wait beyond age 65 for their state pension. Anyone with a birthday between 6 December 1953 and 5 January 1954 will have seen their state pension age shift by up to 3 months, with their retirement date set at 6 March 2019.

Selby added: “Despite the gradual transition, for many this will be extremely painful as they consider working longer or spending less money in retirement. Those forced to wait an extra three months will have missed out on just over £2,000 in income, while a full year of lost state pension will cost savers almost £8,500 in today’s prices.”

Increases to the state pension age were, according to Selby, always going to be “deeply unpopular”, with Labour already setting itself up in opposition to rises beyond age 66.

He added: “Anyone wanting to retire at age 65 needs to consider how they will fund their lifestyle as the state pension age recedes. For many that will involve working longer, either full-time if they are able or part-time to supplement their retirement income. Anyone who doesn’t want to do this, needs to either save more money today or accept a much lower income in retirement.”

 

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