The Office for National Statistics (ONS) has reported that life expectancy in the UK has ground to a halt and seen no increase for the first time since records began. Men are still expected to live to 79.2, while women’s life expectancy remains at 82.9.
Given that life expectancy and mortality is a key assumption when setting the State Pension age, Stuart Price, Partner and Actuary at Quantum Advisory, looks at how these latest figures could impact people’s pensions.
“The fact that we are not living as long is not new news. Last year the Continuous Mortality Investigation (CMI) showed mortality improvements in the UK are slowing down considerably and, since 2015, have actually started to worsen, meaning people are dying younger. Despite this, the government still increased the State Pension age to 68, and a further increase for those under the age of 30 looks increasingly likely.
“In terms of private pensions, sponsoring employers who offer defined benefit (DB) schemes should be jumping around with joy. If people aren’t living as long, it means that pensions aren’t paid for as long and it should help mitigate the increasing costs of funding the arrangements.
“With interest rates and gilt yields on the rise, which will also reduce the cost of funding DB pensions, we may see a slowdown in the decline of these schemes, which are seen as the gold standard in the UK. Perhaps wishful thinking, as I believe this ‘good fortune’ has come too late for DB schemes, and their longevity will also not be increasing!”
Established in 2000, Quantum Advisory provides pension and employee benefits services to employers, scheme trustees and members.