Men could live for up to 12 years longer by 2050 than is currently predicted, dramatically increasing the cost of pension provision, new research claims.
Analysis of current mortality data for 65-year-old men indicates that people are living for longer and that longevity is increasing far more rapidly than previously predicted, according to experts at Cass Business School.
The research found that men reaching 65 in 2050 would on average live to be 91, six years more than is currently predicted.
But it added that the upper end of life expectancy for this group of men was 97, 12 years older than the current age they are expected to reach.
The model, which was formulated by Professor David Blake of Cass Business School and colleagues at Heriot-Watt University and the Nottingham University Business School, warned that the increased life expectancy had big implications for the cost of pension provision.
It said, based on government figures that showed a single male pensioner received an average income of £257 a week in 2005/2006 through state and private pensions, each year of increased life expectancy would cost the Government and companies around £13,364 in today’s money or £160,368 over 12 years.
Professor David Blake, director of the Pensions Institute at Cass Business School, said: ‘We know that people are living for longer but this model demonstrates that longevity is accelerating far beyond what is currently predicted and that there is considerable uncertainty surrounding future life expectancy.
‘This will present a huge challenge for long-term health care providers and intensifies the problems faced by both government and the UK pensions industry.
‘Providers need to urgently update the projection models they use before the pensions deficits reach catastrophic proportions.’
Women’s life expectancy
The new model for life expectancy has so far only been applied to male mortality data for England and Wales but it will be extended to take into account data on women.
The model has already been widely taken up by actuaries in Germany and is currently with the Continuous Mortality Investigation Bureau for approval to be used in the UK.
A DWP spokesman said: ‘People are living longer, but about seven million are not saving enough for retirement. The Government’s package of pension reforms is designed to tackle these challenges.
‘The Basic State Pension will become simpler, more generous and fairer – providing a solid platform for private saving. The forthcoming Pensions Bill will make it easier for people to save through automatic enrolment into workplace pensions or personal accounts.
‘But it’s also important that future generations aren’t left footing the bill for increasing longevity. That’s why State Pension Age will rise gradually to 68 by 2046 for men and women.’
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