The Office for National Statistics’ (ONS) latest data (18 June) has shown that increases in life expectancy are drastically reducing. According to the figures, between 2011 and 2016, 26 local authorities in the UK showed an increase in life expectancy for men, while 17 showed an increase for women. These figures are drastically down from 203 and 128 respectively just a decade earlier.
In response to the figures, Stuart Price, Partner and Actuary at Quantum Advisory, said: “These figures back up the data we use in the pension industry to access mortality when placing a value on defined benefit liabilities. However, to clarify, we are still living longer – just not as long as we initially expected. There are many reasons for this slowdown; a rise in the number of deaths from liver disease and Alzheimer’s, the latter of which is now the biggest killer in the UK, along with the financial distress of the NHS leading it to not function as well as it should.
“Mortality is a key assumption when setting the State Pension age, and despite the ONS’ announcement, I can’t see the government reducing the age. Conversely, it is likely to continue increasing to alleviate some of the pressure on the State Pension.
“Another way that will help keep the State Pension financially sustainable is increasing National Insurance. A proportion of the National Insurance contributions paid by those of us in work are used to fund the State Pension. Currently, on earnings up to c£46K everyone pays 12% of their wages towards NI. Those earning above this threshold only pay 2% on subsequent earnings. I believe this will have to change by either raising this ceiling or increasing the 2% rate.
“With so much uncertainty, it becomes even more important for individuals to save into a private pension in order to retire with a decent level of income.”
Stuart Price, Partner and Actuary at Quantum