Interactive Investor

Retirees’ life expectancy revised down

5th April 2017 09:16

Rachel Lacey from interactive investor

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The fall in life-expectancy is predicted to hit middle income and less well-off groups hardest.

Life expectancy for people retiring now has started to fall, according to the latest research from the Institute and Faculty of Actuaries.

A 65-year old male can now expect to live a further 22.2 years, down from 22.8 in 2014. Meanwhile women of the same age are likely to live another 24.1 years down from 24.9 over the same period.

The report said that that since 2011, the rate at which mortality rates have improved has slowed down.

James Tait, chairman of the Continuous Mortality Investigation (CMI) executive committee which carried out the analysis says: ‘The Continuous Mortality Investigation 2016 has thrown more light on some very interesting trends – namely that, in recent years, the rate at which mortality is improving has been slower than in the first decade of this century. Although it is highly likely that mortality will continue to improve, there is significant uncertainty as to whether this recent slowing in the rate of improvement will continue.’

Interestingly the report did, however, find that mortality rates for members of defined benefit pension schemes – also known as final salary pensions - improved at a faster rate than the general population.

Commenting on the findings, Andrew Tully, pensions technical director at Retirement Advantage says: ‘Using industry statistics to show how long people will live is of course just an indicator, and actual life expectancy can vary widely depending on a multitude of factors.

At the end of the day, no one can predict their own mortality, so the importance of planning in retirement to have secure income which pays the bills, irrespective of how long you live, is crucial.’

On the defined benefit findings, Mr Tully adds: ‘This suggests that the most affluent group of people are not experiencing this slow down in life expectancy but the middle and less well-off groups are experiencing this more than the average would suggest.’

‘Don’t underestimate your life expectancy’

Alistair McQueen, head of savings and retirement at Aviva agrees that predicting life expectancy is more art than science. He says: ‘Predictions are constantly being revised based on the latest information. This recent report adds more information to the prediction pot, but it comes with no guarantee.

‘What we know with more certainty is that we consistently underestimate our own life expectancy. It is common for our own expectations to be influenced by our parents and other generations before us at a time when life expectancy was shorter than it is today, regardless of the latest reports. This underestimation has implications for our financial planning in later life.’ 

Research from Aviva, for example, shows that women aged between 50 and 65 are likely to underestimate their life expectancy by five years, while men will underestimate by an average of eight years.

Mr McQueen adds: ‘In the era of pension freedoms we need to take extra care in considering our life expectancy. Acting on misguided assumptions means we risk running out of our money too soon. Acting with care and consideration will help us navigate the unavoidable uncertainty of life expectancy.’

This article first appeared on our sister website, Moneywise.

This article was originally published in our sister magazine Money Observer, which ceased publication in August 2020.

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