Thursday, 14 March 2019

Britain is no country for old men looking to live longer and longer lives

While some European countries have seen a slowing of improvements in life expectancy, none has fallen back to the extent seen in Britain in England and Wales. The Institute and Faculty of Actuaries, which calculates life expectancy on behalf of the British pension industry, has said that it now expects men aged 65 to die at 86.9 years, which is down from its previous estimate of 87.4 years, while women who reach 65 are likely to die at 89.2 years, down from 89.7 years. This slowing down in life expectancy first emerged around 2010-11 is 'a trend as opposed to a blip' and has accelerated. Last year’s analysis cut forecasted life expectancy by two months. This year it took off another six months. All in all, compared with 2015, projections for life expectancy are now down by 13 months for men and 14 months for women.

Tim Gordon, Chair of the Institute's 'Continuous Mortality Investigation Projections Committee', has said: “It’s now widely accepted that mortality improvements in the general population since 2011 have been much lower than in the earlier part of this century. Average mortality improvements between 2000 and 2011 were typically over 2 per cent per year but have since fallen to around 0.5 per cent per year. 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.”

There maybe trouble ahead, since falling life expectation comes at a time when retirement age is increasing. The state pension age is planned to rise to 68 in 2037 and the Government has floated the idea of increasing it to 70, but will come under pressure to backtrack if longevity continues to drop. Tom Selby, Senior Analyst at the investment firm AJ Bell, has said : “It is somewhat ironic that this latest downgrade in life expectancy projections comes the day after 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.”

On the other hand, pension companies are rubbing their hands together and have already begun to cash in on falling expectations. Old men and women not living as long as previously expected is good news. Legal & General said it was releasing £433m of the reserves it holds to pay future pensions because of the reductions in longevity expectations. In addition, City analysts immediately pencilled in more huge shareholder gains. RBC Markets said: “If you thought reserve releases to date were large, just wait. Today’s model will result in major reserve releases, as insurers will pay annuities for a shorter period of time than they previously reserved for.”

Academics have put forward a number of theories on why life expectancy has stalled. Sir Michael Marmot, Director of University College London’s Institute of Health Equity, has said it is “entirely possible” that the Government's austerity policies have had an impact, while dismissing the idea that humans are reaching the limits of their natural lifespans.

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