Savers set to benefit as actuaries cut life expectancy improvements

Tom Selby
7 March 2019

•        The Continuous Mortality Institute (CMI), part of the Institute and Faculty of Actuaries (IFoA), has lowered its estimate of UK life expectancy improvements
•        Life expectancies at age 65 are six months lower than in previous analysis for both males (21.9 years) and females (24.2 years)
•        Move comes in response to data suggesting life expectancy improvements have ground to a halt in recent years
•        Savers buying an annuity could benefit from improved rates, while defined benefit scheme deficits are likely to fall


Tom Selby, senior analyst at AJ Bell, comments: 


“There is an increasing body of evidence pointing to a slowdown in life expectancy improvements. 

“If this were to continue over a longer period of time it could have profound implications both for individuals and society as a whole. It could also fundamentally affect projections around Government spending in a number of areas, particularly in relation to the state pension and social care. 

“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.

“In the shorter-term, falls in expected life expectancy are good news for savers buying an annuity as the rates on offer should increase. 

“Companies sponsoring defined benefit schemes are also set to benefit – particularly those about to complete triennial valuations. If these schemes are able to factor in lower life expectancies than at the last valuation, you would expect liabilities and deficits to fall. 

“This could in turn provide a cashflow boost to the business if contributions aimed at reducing deficits can be reduced.”

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