It is looking increasingly likely that the age at which we can collect our State Pension will go up following two separate reports for the government both focusing on the predicted increase in life expectancy. A report by John Cridland predicts workers under the age of 45 may have to wait until they are 68 before they can draw their pension, while a document for the Department for Work and Pensions (DWP) suggests those under 30 may not have access to theirs until they reach 70.
This is all fair enough if, as we are hearing more frequently, we are going to live longer. However, according to the Continuous Mortality Investigation (CMI) in recent years mortality improvements in the UK have slowed down considerably and, since 2015, have actually started to worsen meaning people are dying younger. So what does this mean for our pension schemes?
Firstly, let’s look at why our mortality is getting worse. The much-publicised financial distress of the NHS is widely perceived to be a major contributor behind the recent increase in younger mortality in the UK. However, there is evidence that early mortality rates are also going up further afield. In the USA, for example, overall mortality increased from 2014 to 2015 – the first such increase in 20 years. The main causes of this increase have been attributed to the significant rise in deaths from Alzheimer’s which, when combined with Dementia, is the leading killer in the UK. Liver disease is also on the up largely put down to increasing drug and alcohol consumption.
The CMI carries out research into mortality and morbidity experience and will shortly be publishing its 2016 mortality improvement tables which look set to reflect this recent experience in the UK. The 2015 tables showed lower life expectancies than the 2014 version and the new 2016 tables are expected to show a further reduction.
It is too early to say definitively if this trend is set to continue into the future, however, having seen two years of worsening improvements, maybe it is time to change the widely held view that we will all continue to live longer. Mortality is a key assumption when setting the State Pension age, so the Government may be premature looking to increase the age even further at this current point of time.
|
