YOU would need to have been in the Big Brother house for a very long time not to know that people are living longer. But while this is good news for us as individuals, it comes at a cost:
• As taxpayers (local and national), we see increasing costs of public sector pensions.
• As shareholders, we find our companies' profits are reduced to top up defined-benefit pension schemes.
• As individuals (unless we are one of the shrink
ing minority in defined-benefit pension schemes), we are having to pay more into our pensions or work longer; broadly speaking, another year of working and saving for every extra year we are expected to live.
• As taxpayers (yes, us again), we see the cost of social services rising, especially in Scotland, where care for the elderly is free. This is the biggest of the four costs. Yet, to my mind, this receives far too little publicity and debate, possibly because, inevitably, it has no easy answers and is perceived to be a long way off.
The actuarial profession and other demographic experts are blamed for "getting their sums wrong". However, the present rapid improvement in life expectancy is without precedent and has been much easier to report than to predict.
Given this increase in the length of people's lives, there have been many assumptions made about exactly how long lifespan is expected to increase. With these in mind, the actuarial profession has a lot on its hands in trying to calculate accurate figures.
However, we are where we are. What the public wants to know is: are actuaries on the case and are they doing any better at spotting the next change in the pace of improvement?
For example, will we be able to tell quickly whether:
• The beneficial improvements in medical science or the detrimental effects of obesity and sedentary lifestyles are getting the upper hand?
• Is the public smoking ban likely to help increase life expectancy?
• Is the government's 'five-a-day' fruit and vegetable campaign having the desired effect?
I am cautiously optimistic that we are now better able to spot the changes.
First, a lot more data is being gathered, giving actuaries more evidence to sift through to understand the complexities of longevity/mortality.
Secondly, the techniques for using that data to model future patterns of life expectancy are much more sophisticated and sensitive than before.
We are also much more conscious of the need to give the users of the projections the earliest possible warning of any changes.
We know, for example, that affluence can have a bigger impact on your life expectancy than your sex. For example, a man on a pension of £13,000 a year is likely to live longer than a woman of the same age on a pension of £3,000 a year.
Better medical treatment, housing, care and general quality of life made affordable by a bigger pension are key factors in lengthening life expectancy, but planning and budgeting are essential to ensure that enough is in the pot to cover those 'added' years.
More analysis, such as your occupation, where you live, is helping to identify which factors matter most.
Recent statistics suggest that smoking takes nine years off your life, obesity seven years and heavy drinking six years. And becoming single again takes three years off too. Beginning to take regular exercise after years of inactivity is always going to help offset these effects. Lifestyle choices really do matter and the earlier one makes such changes, the longer the benefits are likely to last.
But we also now know that small changes in some of the underlying drivers can have an enormous impact on life expectancy, which, in turn, increases the difficulty in making projections.
The actuarial profession has just published a major library of research work on mortality. The research has found that even without a major breakthrough in medical science, the possibilities for a healthy man born in 1960 range from age 88 to age 107. That's a difference of almost 20 years, and with such evidence it's easy to see that the longevity issue is not something that is going to be solved in one fell swoop.
Longevity is one of the great challenges for the actuarial profession and for society as a whole. The profession is very much on the case. Society and government need to start thinking about and debating the consequences and their knock-on effects.
Being flexible and able to adapt to the next big change is critical.
Ronnie Bowie is senior partner at Hymans Robertson
