Interactive Investor

interactive investor comments on ONS life expectancy data

23rd September 2021 10:54

Rebecca O'Connor from interactive investor

Our head of pensions and savings also comments on the latest ONS occupational pension schemes survey.

New research published today by the Office for National Statistics (ONS), revealed a decline in life expectancy among men for the first time since the 1980s, while longevity expectations for women remained unchanged – largely because of the coronavirus pandemic.

In the latest estimates, the ONS saw virtually no improvement in life expectancy for women compared to 2015 to 2017 at 82.9 years, while for men, life expectancy has fallen back to levels reported for 2012 to 2014, at 79 years. This is the first time the ONS has seen a decline when comparing non-overlapping time periods since the series began in the early 1980s.

Commenting, Becky O’Connor, Head of Pensions & Savings, interactive investor, says: “These are the first life expectancy figures from the ONS that include some impact from the pandemic in 2020. The result is that there has been no improvement in life expectancy for women and for men, a decline to levels last seen in the period 2012 to 2014. The ONS said this is the first decline since the series began in the early 1980s.

“However, much pensions policy is based on the assumption that longevity will continue to rise, including normal minimum pension age rises and state pension entitlement age.

“The ongoing increases to the ages at which people can access their pensions needs a serious re-think in light of this decline in longevity. If life spans continue to stay the same or decline further, there can be no justification for continuing to increase pension entitlement ages. Otherwise, we have to look seriously at whether we are effectively kissing goodbye to retirement as a concept in the UK. A man retiring at 67 who dies at 79 would have only 12 years after a life of hard work for retirement. This compares poorly with the 20+ years of retirement enjoyed by previous generations.”

Financial survey of pension schemes

The ONS has also published estimates of membership, income and expenditure, assets, liabilities and derivatives of UK-funded occupational pension schemes from the Financial Survey of Pension Schemes (FSPS) in Q1 2021.

Commenting, Becky O’Connor says: “During some of the hardest months of the pandemic, when lockdowns were in full force, it looks as though workers were making the most of the reduction in normal spending by boosting their workplace pension contributions.

“The data suggests that when people have more spare cash to set aside, they do think about their pensions and act by increasing contributions and we should take heart from this response. It’s good to see that when given the opportunity, people do prioritise their pensions.”

Key findings

  • Employee and employer contributions to private sector defined contribution schemes grew by 6% and 10% respectively, from Quarter 4 (Oct to Dec) 2020 to Quarter 1 (Jan to Mar) 2021. For the first time, the value of overseas direct investments in central government and corporate bonds are published. At end-March 2021, overseas holdings formed 6% of central government bonds and 46% of corporate bonds.
  • The market value of pension funds was £2.4 trillion at end-March 2021.
  • Forward foreign currency contracts grew by 15% for positive value derivative contracts, and 19% for negative value derivative contracts between end-December 2020 and end-March 2021; this may be because of hedging against currency risks, in the context of economic shocks.

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