Life expectancy increases slowing ‘dramatically’
16 August 2018
Increases in life expectancy have slowed dramatically in recent years, in what pensions provider AJ Bell said could have huge ramifications for society if it continues.
Life expectancy for males at birth improved 4.2 weeks a year from 2011 to 2016, compared to 17.3 weeks a year in the preceding six-year period. Meanwhile, female life expectancy at birth rose by just 1.2 weeks a year from 2011 to 2016, significantly down on the 12.9 week annual improvement from 2006 to 2011.
The rates are among the lowest in the developed world in recent years and poses a challenge to policymakers across a range of issues, including retirement, the firm said.
Tom Selby, senior analyst at AJ Bell, said: “The most recent available data places the UK right at the bottom of the developed world when it comes to life expectancy improvements in recent years. What we don’t know yet is the extent to which this is the beginning of the end of life expectancy improvements in the UK or simply a temporary blip.
“If life expectancy improvements do grind to a halt – or even go into long-term decline – it will have huge ramifications not just for Government, but for society as a whole. It is no exaggeration to say this could yet prove to be the biggest public policy challenge of our generation.”
However, Selby said the slowing rates could be good news for defined benefit schemes, which might be able to cut their liability estimates and eliminate deficits quicker than expected. Annuity rates could also improve if insurers believe they will pay out guaranteed incomes for a shorter period of time. But, the biggest debate will centre around the state pension.
He continued: “Many would argue the proposed state pension age increases are long overdue. While life expectancy improvements have slowed in recent years, this follows decades of almost unbroken and rapid longevity increases in the UK. So, while stalling longevity improvements might reduce the amount the state pension costs over the long-term, it would take a dramatic change in assumptions to halt these increases altogether.
“One of the big issues current and future governments need to consider in relation to life expectancy is equality of outcomes. Although a universal state pension has the significant advantage of simplicity, it risks failing those on low incomes who on average tend to have a lower life expectancy.”
Steven Cameron, pensions director at Aegon added that it was important to look beyond the averages. “For example, life expectancies vary significantly between geographical regions and individuals risk running out of money part way through retirement if they fail to accurately calculate their income needs.
“Living longer is great news if you have the resources, and good health, to enjoy it.”
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