As the nation ages, so will the client base of many advisers. Fergus Bescoby assesses longevity and its impact on underwriting.
We are constantly being reminded how our population is living longer and how this is likely to impact on future retirement ages and pensions. Regular press articles bemoan the fact pension pots are shrinking and the likelihood of us having to work longer is becoming more of a fact than a possibility.
It has been predicted that, by 2050, the number of older persons in the world will exceed the number of young for the first time in history and that the fastest-growing age group will be the over 80s. Even more amazing is that one third of all newborns will now live to 100.
This change in longevity is beginning to spill over into the insurance industry and we are finding ourselves having to underwrite increasingly older lives.
So, what is causing us to live longer now than previous generations?
The ageing population of the UK mirrors that in many other European countries. It is partly a consequence of the age structure of the population alive today, in particular the ageing of the large number of people born during the 1960s baby boom.
It also stems from increased longevity - a man born in the UK in 1981 had a cohort life expectancy at birth of 84 years. For a boy born today, the figure is 89 years, and by 2030 it is projected to be 91.
The trend for women is similar. A girl born in 1981 was expected to live for 89 years and one born today might expect to live to 92. Cohort projections suggest a girl born in 2030 might live to 95.
Healthy life expectancy has not, however, increased as fast, resulting in proportionally greater demands on families and public services such as the NHS.
This increase in longevity can be attributed to a number of factors including improvements in health, diet and preventative healthcare, along with vaccinations and antibiotics which greatly reduced deaths in childhood. Health and safety in manual workplaces has contributed to a reduction in both accidental deaths and work related illnesses and a reduction in the number of smokers also obviously helped.
Along with the points mentioned above, there has also been a general decrease in the number of children being born per family. Over the past 40 years, women have been having fewer children.
However, in the last decade, birth rates have risen slightly. Women in the UK are currently having 1.9 children, the highest figure since 1973, but far lower than 2.93 in 1964.
An ageing population
As a result of this, many major industrial countries, including the UK, are facing an ageing population. It is likely that life expectancy of the most developed countries will continue to slowly advance and then reach a peak in the mid-80s.
