Life. Being in it for longer.
By David Orford on Wednesday, September 28th, 2016
For those of us old enough to remember him, Norm and his Life. Be in it message was everywhere, on TV, radio and every Sunday newspaper you ever read. Norm encouraged everyday Aussies to get out there and live a healthier and more active lifestyle. Well guess what? Some part of it must have worked because today we are the eighth longest living nation in the top 10 OECD countries.
So if you are wondering what to expect for your fund members, the longevity numbers are truly quite impressive. Today’s toddlers will live at least into their eighties for both men and women (80.1 vs. 84.3 years for women) compared to a grim outcome if you were born in the 1880’s – only 47.2 and 50.8 years for men and women respectively.
To emphasise the rapid change in mortality rates, I read recently a Longevity Modelling Bulletin from the Institute and Faculty of Actuaries in the UK and we are not alone. Between 1970 – 2013 life expectancy for males in England and Wales has risen dramatically, by over 6 years. This compares to change in life expectancy between 1841 and 1970 (a much longer timeframe!) which saw an increase of only around 1 year. Better management of health-related issues and new frontiers in medicine has all had a lasting and dramatic impact and this is likely to continue.
Being an actuary myself and wanting to make sure that we get things right, we need to ensure that the expected changes to structure and types of annuity products available post 1 July 2017 (now less than 12 months away) considers not just the mortality rates now, but the projections into the future.. A misstep here could mean financial disaster for an annuity provider, or the unthinkable – an un-competitive un-saleable annuity.
The design of the annuity offering itself is key. Sharing profits and losses with annuitants delivers value to all parties and my plan for a realistic Lifetime Income Stream does exactly that.
Life (Time Annuity). Be in it.