Club Vita respond to the latest ONS longevity statistics

Steven Baxter, Head of Research and Development comments on the impact the latest longevity data from the ONS will have on Defined Benefit pension schemes and the outlook for future longevity improvements. 

“Trustees and sponsors of Defined Benefit pension schemes will be curious as to whether today’s ONS findings of flat-lining longevity spells good news for funding positions. In practice many will have been closely monitoring these emerging trends with their advisors. Ultimately Trustees have a regulatory requirement to set their life expectancy assumptions using prudent principles. A key question is how relevant this national population data is to pension scheme liabilities. Typically, 70% of a DB scheme’s membership will sit in the top third income bracket. Club Vita data shows that within this more affluent class, particularly affluent men, life expectancy continues to increase. As a result, I would urge caution to any DB Trustees considering assuming life expectancy is levelling off across all their membership.”

“There are three drivers which are most likely behind this recent slowdown in life expectancy. Firstly, the combination of our aging population increasing demand for health and care services at the same time that austerity measures have been restricting the available finances. Secondly, we’ve also had a series of bad winters – particularly cold or with virulent flu strains - which may have triggered a decline into frailty amongst the elderly and sadly premature death. Thirdly, most of the gains in life expectancy achieved in recent decades have arisen from dramatic falls in cardio-vascular deaths owing to smoking cessation and lifestyle changes. We may simply be reaching the end of this era and awaiting the next ‘wave’ of strong improvements as we rage war on cancer or Dementia.  For trustees and sponsors this means that there is considerable uncertainty on the short-term outlook – we may see several more years of low improvements or a reversion to strong improvements in relatively short order.

 “We shouldn’t forget that pension scheme obligations span many decades into the future. Longer term, medical innovations and the potential for lifestyle changes hold the potential for continued increases in life expectancy – after all the UK is a long way short of being world leaders in longevity.”

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