policy debate: longevity, health and public policy. how should policy-makers respond to increased...

Longevity, health and public policyHow should policy-makers respond

to increased longevity?Monday 22nd July 2013

This event is kindly supported by #LivingLonger

Welcome

Baroness Sally GreengrossChief Executive

ILC-UK


Dr Kerrigan ProcterManaging Director, Annuities

Legal & General

Welcome


Joseph LuHead of Longevity Risk Team

Legal & General

The facts. The impact of longevity on UK population


Longevity – Three Key Challenges

July 2013

5

Joseph Lu

Head of Longevity Risk Team, Legal & General

Life expectancy at birth for Developed Nations (1970 to Current)

For England & Wales, •Male life expectancy at birth has increased from 69 years (1970) to 79 years (2011)•Female life expectancy at birth has increased from 75 years (1970) to 83 years (2011)

6Background

Source: Human Mortality Database (www.mortality.org)

Life expectancy at age 65 (1970 to Current)

7Background

Source: Human Mortality Database (www.mortality.org)

For England & Wales, •Male life expectancy at age 65 has increased from 12 years (1970) to 18 years (2011)•Female life expectancy at age 65 has increased from 16 years (1970) to 21 years (2011)

Number of people above age 65 will rise (2013 to 2043)

8Background

•Nearly 60% rise in next 30 years

•6.5m more peopleSource: Office for National Statistics

9Challenge 1: Disability

•Of every year of increase in life expectancy…

•3 months spent with disabilitySource: Figures derived from Murray et al. (2013). UK health performance: Findings of the Global Burden of Disease Study 2010. Lancet;381(9871):997-1020

10Challenge 2: Health & Care Costs

* HMRC Survey of personal income 2010/2011 (employment income, excluding other investments)

Source: Health Economics Research Centre, University of Oxford for the Alzheimer’s Research Trust. Dementia 2010: The prevalence, economic cost and research funding of dementia compared with other major diseases. Executive Summary.

11

• 87% Final Salary pension schemes now closed.

• Defined Contribution’s 5-15% salary contribution considered insufficient.

• Our experience shows that average annuity pot size is about £30-35K, giving about £1-3K per year of annuity depending on individuals and market conditions.

• The minimum annual income for retired people is about £15,000 and to live comfortable they would need more. **

• DWP – 10.7m to experience inadequate income.

Challenge 3: Pension Provision

Source: Select Committee on Public Service and Demographic Change, House of Lords. (2013). Ready for ageing? The Stationery Office Ltd.

** Joseph Rowntree Foundation.

12

5x

Source: ONS House Price Index

Challenge 3: Pension Provision

*Source: Select Committee on Public Service and Demographic Change, House of Lords. (2013). Ready for ageing? The Stationery Office Ltd.

13Increasing longevity forces us to rethink

14

This presentation contains confidential and proprietary information of Legal & General PLC (“L&G”). The presentation, and any opinions on financial products it contains, may not be modified, sold, or otherwise provided, in whole or in part, to any other person or

entity without L&G's written permission.

L&G makes no representations as to the accuracy or completeness of any of the information in this presentation and any liability on the part of L&G in relation to the inaccuracy or incompleteness of the information is excluded to the extent permitted by law. Nothing in

this presentation amounts to an offer, promise or advice.

Professor Les MayhewProfessor of Statistics

Cass Business School and ILC-UK Advisor

Increasing Longevity – the good news and bad


16

Increasing longevity – the good news and bad

Les Mayhew Cass Business School Faculty of Actuarial Science and

InsuranceILC-UK Fact pack launch

July 2013

17

Longevity –Strategic issues arising

• The economy is flat but given an ageing population should we really be surprised?

• Average health status falls in an ageing population but can this be altered or delayed?

• Are available demographic solutions like increased migration or fertility realistic?

• What is the economic impact of an ageing population on GDP, productivity, economic activity rates, tax revenues, pension age?

• To what extent might improved health expectancy overcome the economic downsides of ageing versus other economic levers?

• If health is an important factor what are the main threats to health and what can be done?

18

Impact of population ageing in the labour market

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

1970 1980 1990 2000 2010 2020 2030 2040 2050 2060 2070

year

ratio

of p

opul

atio

n ag

ed 2

0-64

to p

opul

atio

n ag

ed 6

5+

The dependency ratio measures the number of working age to people above retirement age. This chart shows that the ratio turns sharply down after 2006 and will continue to fall at least until 2040 putting further pressure on pensions.

19

0

1

2

3

4

5

6

7

8

50 55 60 65 70 75

Age

Rat

io o

f adu

lt po

pula

tion

belo

w g

iven

age

to th

e nu

mbe

r abo

ve 20102030

State pension age

A) Joint state pension age in 2010 was 62.5 years

B) State pension age in 2030 will

be 67 years

Each curve represents the ratio of the population between age 20 and the age on the horizontal axis in 2010 and 2030. For the same ratio to apply in 2030 as in 2010, state pension age needs to be 67 years.

20

0

1

2

3

4

5

6

7

8

50 55 60 65 70 75

Age

Rat

io o

f adu

lt po

pula

tion

belo

w g

iven

age

to th

e nu

mbe

r abo

ve 20102030

Ability to work for longer?

A) Joint state pension age

in 2010 is 62.5 years


be 67 years

Joint male and female health expectancy at birth is higher than current pension age but below future pension age. Poor health in later years will increasingly become a constraint on ability to work for longer.

Health expectancy

at birth

21

0

1

2

3

4

5

6

7

8

50 55 60 65 70 75

Age

Rat

io o

f adu

lt po

pula

tion

belo

w g

iven

age

to th

e nu

mbe

r abo

ve 20102030

Ability to work for longer?

A) Joint state pension age

in 2010 is 62.5 years


be 67 years

Health expectancy

at birth

Although default retirement age scrapped, how can age related disability and pressure to work for longer be reconciled?

22

Influences on labour market participation among people aged 50- 59 and 60-69

The biggest single factor predicting whether economically active or not is your health. Male cohabiting home owners with no caring responsibilities are also predictive of economic activity. Post-60 these factors weaken as people retire but good health remains the most influential of these factors (data source: ELSA)

factor or influence age 50-

59 age 60-

69 education 1.5 0.7 good health 5.2 2.7 no caring responsibilities 1.5 1.3 home owner 2.2 1.3 cohabiting 1.3 1.3 male 1.6 1.9

23

How did we get here and where are we heading?

60

65

70

75

80

85

90

95

100

1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080

yearlif

e ex

pect

ancy

at b

irth

Japanese females in 2009: at birth 86.4 yrs

UK males and females:

at birth 80.3

0

10000

20000

30000

40000

50000

60000

70000

80000

90000

100000

0 10 20 30 40 50 60 70 80 90 100 110

age

num

ber o

f sur

vivo

rs

1950

2010

The left hand panel shows how the chances of survival in 1950 compared with 2010 have improved significantly. In the right hand panel life expectancy has been extrapolated to show how the trend is expected to develop over the next decades, flattening off towards the end of the century.

Flattens off here

24

Changes to the modal age of death between 1980 and 2010

Postponement of death is reflected in changes to the modal age of death in 1980 was 76 years and in 2010 89 years. By 2030 it will be 93 years. Trend data show that annual number of deaths has fallen steadily since the 1970s from around 680k to 550k, so is death a dying business?

0

5,000

10,000

15,000

20,000

25,000

0 10 20 30 40 50 60 70 80 90 100 110

age

num

ber o

f dea

ths

1980

2010

Modal age of death was 76 in 1980 and 89 in 2010. By

2030 it will be 93

500,000

550,000

600,000

650,000

700,000

1970 1975 1980 1985 1990 1995 2000 2005 2010 2015

yearan

nual

num

ber o

f dea

ths

25

Gender differences in life expectancy at age 30

The gender gap in life expectancy at age 30 is closing ~ 5.7 years in 1970 (A) compared with 3.8 years in 2009 (B). If extrapolated trend lines converge around 2030.

35

40

45

50

55

60

1950 1960 1970 1980 1990 2000 2010 2020 2030

year

life

expe

ctan

cy a

t 30

FemalesMales

A

B

A major factor has been changes in male occupation and the falling prevalence of smoking. E.g. in 1948 80% of males smoked. Today only it is about 21% - approximately the same as for women.

26

Estimating the economic impacts of improvements in health

As state retirement age shifts right so a higher proportion of people will not be fit to work but neither will they be eligible for the state pension. In general if life expectancy increases faster than healthy life expectancy grey area grows in size. The larger it is the greater are health and social care costs, benefit spend and lost productivity. Meanwhile the survival frontier is moving to the right.

healthy

dead

Sick disabled

State pension age

Chronic disease fills much of this space especially in older adults whilst co-morbidity – the co-presence of more than one chronic disease- increases with age. Dementia is a problem in the oldest old

27

Estimating the economic impacts of improvements in health

As state retirement age shifts right so a higher proportion of people will not be fit to work but neither will they be eligible for the state pension. In general if life expectancy increases faster than healthy life expectancy grey area grows in size. The larger it is the greater are health and social care costs, benefit spend and lost productivity.

healthy

dead

Sick disabled

State pension age

28

Expected life =

expected healthy working life + expected unhealthy working life + expected healthy retired life + expected unhealthy retired life

Uses following identity:

Assumptions

• Those of working age will either work (and receive a wage) or are economically inactive

• Unhealthy lives receive health & social care and benefits as per current benefit rules

• All retirees receive basic state pension

• The economically inactive population is in caring roles, unpaid work, full time education or in leisure

Macro economic model overview

29

Model overview

LE & HLE

Sick/disabled population

Economically active population

GDP, GDP p. capita

Demography

Activity rate

Health trends

Wage productivity

Public expenditure

on health and welfare

Tax rate

Net income from work

Non-wage GDP (dividends, rents, royalties etc)

Income from work

Benefits & pensions

30

Sensitivity analysis – changes in one variable at a time

Effect of a 1 year increase in life expectancy or health or a 1% increase in wage productivity, pensions, benefits or population variables on GDP and average tax rates. Increases to healthy working life have the greatest effect on GDP and reducing taxes.

quantityGDP % change

difference in tax rate (%)

life expectancy increases 1 year -1.6 1.7healthy working life increases 1 year 2.7 -2.6healthy retired life increases 1 year 0 -0.7participation rate increases 1% 1.6 -0.5wage productivity increases 1% 1 -0.3pension increases 1% 0 0.2benefits in retirement increases 1% 0 0.03benefits in working age increases 1% 0 0.1population increases 1% 1 0

31

Where are health improvements going to come from?

We can• Reform health care• Make changes to life styles• Improve the economy

32


Reform health care• Changes in healthcare delivery• Re-balancing of priorities• More emphasis on prevention• Changes to end of life care

33


Make changes in life styles• Diet• Exercise • Safer work places• Smoking cessation

34

Relationship between gap in life expectancy and gender difference in smoking prevalence

y = 0.1899x + 3.5448R2 = 0.7489

0

2

4

6

8

10

12

14

0 5 10 15 20 25 30 35 40 45

prevalence gap (%)

LE g

ap (y

ears

)

Sources: HMD and World Health Organisation Tobacco Free Initiative, 2011

Ukraine

England & Wales

FranceJapan

Sweden

35

Where are the health improvements going to come from?

Improve the economy• Increase GDP• Reduce health inequalities

36

Source: Cass Business School/ILC-UK Key:

A Using value of home or other assets

B Disability Linked Annuities

C Insurance products

D Personal Care Savings Bonds

£0 £5000 £10,000 15,000 £20,000 £25,000 £30,000

Net income p.a.

£250k

£225k

£200k

£175k

£150k

£125k

£100k

£75k

£50k

£25k

£0k

Assets

Self-funders

Paying for social care

B

D

Personal Care Savings Bonds – a new way of saving towards

social care in later life

Les Mayhew and David Smith

June 2013

C

A

37

Longevity – So is it good news or bad?

• Good news is that we are all living longer but longevity needs to be managed to protect living standards

• Not to do so will increase taxes, squeeze public expenditure and pensions and increase immigration pressures

• Although higher population means greater GDP it does not mean higher living standards

• We need to recalibrate our approach to health care – the importance of prevention and how health care is delivered

• The bad news is that the demand for social care will increase and this has to be paid for from our own resources

• An ‘active ageing scenario’ helps to mitigate these problems by enabling people to work longer in better health

38

THE END

39

References (1)Mayhew, L. and D,Smith (2013) Personal Care Savings Bonds - a new way of saving towards social care in later life. ILC-UK. http://www.ilcuk.org.uk/images/uploads/publication-pdfs/Personal_Care_Savings_Bonds.pdf

Mayhew L.D., D.Smith (2013 Under review), 'Gender convergence in life expectancy and the postponement of death',

Mayhew, L. and B. Rickayzen (2012) The ageing population: Crunch time for Government reforms. Economic Affairs Vol 32(2), 96-100Mayhew, L. (2012) The UK Care Economy – Improving outcomes for carers. Published by Carers UK.https://www.carersuk.org/professionals/resources/research-library/item/2837-the-uk-care-economy-improving-outcomes-for-carers

Mayhew, L. and D. Smith (2011) Human survival at older ages and theimplications for longevity bond pricing. The North American Actuarial Journal (NAAJ)–Vol 15(2). http://www.soa.org/library/journals/north-american-actuarial-journal/2011/no-2/naaj-2011-vol15-no2.aspx

Mayhew, L., M. Karlsson, and B. Ricklayzen, B. (2010) The Role of Private Finance in Paying for Long Term Care. The Economic Journal, Vol 120, Issue 548, F478–F504, November 2010. http://onlinelibrary.wiley.com/doi/10.1111/j.1468-0297.2010.02388.x/pdf Mayhew, L. (2009) On the effectiveness of care co-ordination services aimed at preventing hospital admissions and emergency attendances. Health Care Management Science. Vol 12(3), 269-284, DOI 10.1007/s10729-008-9092-5. http://www.ncbi.nlm.nih.gov/pmc/articles/PMC2713026/pdf/10729_2008_Article_9092.pdf Mayhew, L. (2009) Increasing Longevity and the economic value of healthy ageing and working longer. Commissioned report for HMG Cabinet Office Strategy Unit. http://www.hmg.gov.uk/media/33715/economicsofageing.pdf

40

References (2)Mayhew, L., J. Richardson, B. Rickayzen (2009) A study into the detrimental effects of obesity on life expectancy in the UK. Actuarial Research paper, Cass Business School.

Karlsson, M., L. Mayhew, B. Rickayzen (2008), In Sickness and in Health? Dynamics of Health, Cohabitation in United Kingdom. In Sandra Dawson and Zoë Slote Morris (ed.), Future Public Health: Burdens, Challenges and Opportunities, Cambridge: Palgrave Macmillan, ISBN 9780230013599.

Karlsson, M., L. Mayhew, B. Rickayzen (2008), In Sickness and in Health? Dynamics of Health, Cohabitation in United Kingdom. In Sandra Dawson and Zoë Slote Morris (ed.), Future Public Health: Burdens, Challenges and Opportunities, Cambridge: Palgrave Macmillan, ISBN 9780230013599.

Mayhew, L., and D. Smith (2008), Using queuing theory to analyse the Government’s 4-h completion time target in Accident and Emergency departments. Health Care Management Science, 11(1), 11-21

Karlsson, M., L. Mayhew, B. Rickayzen (2007), Long term care financing in 4 OECD countries: fiscal burden and distributive effects. Health Policy, 80(1), 107-134

Mayhew, L. and D. Blake (2006) On The Sustainability of the UK State Pension System in the Light of Population Ageing and Declining Fertility. Economic Journal, 116(512), F286-F305

Karlsson, M., L. Mayhew, R. Plumb., and B. Rickayzen. (2006) Future costs for long-term care: Cost projections for long-term care for older people in the United Kingdom. Health Policy, 75(2), 187-213

Mayhew L., Alder, J., Moody, S., Morris, R., Shah, R. (2005) The chronic disease burden – An analysis of health risks and health care usage. Cass Business School London, Special Report, 56pphttp://www.sias.org.uk/siaspapers/search/view_paper?id=Chronic

McKellar, L., D. Horlacher, T. Ermoliev, and L. Mayhew (2004) The Economic Impacts of Population Ageing in Japan. Edward Elgar Publishing , ISBN 978-1843763604

Mayhew, L. (2003) Disability-Global Trends and International Perspectives. Innovation: The European Journal of Social Science Research. 16(1), 3-28

Professor Michael MurphyProfessor of Demography

London School of Economics

Healthy ageing: an international perspective


Healthy ageing: an Healthy ageing: an international perspectiveinternational perspective

Mike Murphy, London School of Economics

Prepared for Policy Debate: Longevity, health and public policy. How should policy-makers respond to increased longevity?, Monday, 22nd July 2013

Britain in EuropeBritain in Europe• The British population is growing

more rapidly than in many EU countries. Between 2001 and 2011, the population of England and Wales grew by 7.3% compared with 3.5% in EU-27 (excluding UK). Population growth is also accelerating; an increase of 3.8 million compared with 1.6 million in the previous decade 1991-2001.

Main trends among Main trends among older peopleolder people

Year 2011 2021 2031 2041Both sexes (000s) 50 & over 11,693 13,584 14,753 16,07065 & over 5,862 7,001 8,544 9,63185 & over 970 1,211 1,694 2,273All ages 31,833 34,110 36,093 37,794 Support ratioa 3.93 3.29 2.76 2.53M:F 85 & overb 49.6 62.5 70.0 72.3

Source: ONS Population projections 2010-based.Notes: a Number of persons aged 15-64 for each person aged 65 & over.b Number of males per 100 females aged 85 and over.

Years of life expectancy gained by Years of life expectancy gained by age in subsequent decade, England age in subsequent decade, England

and Wales, based on ONS dataand Wales, based on ONS dataMalesMales FemalesFemales

Successful agingSuccessful aging• “avoidance of disease and disability, maintenance

of high physical and cognitive function, and sustained engagement in social and productive activities” (Rowe and Kahn 1997, p. 439).

• The World Health Organization (WHO) defines active ageing as “. . . the process of optimizing opportunities for health, participation, and security in order to enhance quality of life as people age”o participation,o healtho security

Health statusHealth status• Improvements in mortality have not

been matched by corresponding improvements in health status. Although the evidence is more mixed and forecasts even more difficult to make than in the case of mortality, there is little indication of improvements in health comparable to those of about 3% per annum observed for mortality.

Health needsHealth needs• The additional years of life gained are

concentrated at older ages, where prevalence of degenerative diseases such as dementias affects a high fraction of the population. On balance, the likelihood is that number of years spent in good health will increase over time, but it less clear whether the number of years and the proportion of remaining life spent in poor health or with disabilities will increase or decrease (Wanless, 2002).

Leading causes of death by sex in Leading causes of death by sex in 2011 & 2001, England and Wales2011 & 2001, England and Wales

2012 European Year for 2012 European Year for Active Ageing and Active Ageing and Solidarity between Solidarity between

GenerationsGenerations

Healthy Life Years at Healthy Life Years at birth in 2010birth in 2010

Jagger et al. 2013. Mind the gap—reaching the European target of a 2-year increase in healthy life years in the next decade. European Journal of Public Health, 1–5

EmploymentEmployment• The number of people of state pension age

and above in employment has nearly doubled over the past two decades, from 750 thousand in 1993 to 1.4 million in 2011. Older workers are more likely to be self-employed than younger workers and around two-thirds are part-time usually with the same employer. Men working later in life tend to be in higher skill jobs, while the reverse is true for women.

ParticipationParticipation• Reduced mortality especially among men has

increased the proportion of older people who remain married and reduced the proportion of women who are widowed.

• Trends are also affected by the marital histories; those born in the 1940s had the highest rates of marriage ever experienced.

• These cohorts are also more likely to have children as potential informal carers. However, this favourable trend will reverse as those born in the 1960s enter the older age bands – implications for informal care.

Feeling lonely: by age group Feeling lonely: by age group and sex, 2009–10 Englandand sex, 2009–10 England

Measuring National Well-being - Older people and loneliness, 2013Jen Beaumont Office for National Statistics

Social CareSocial Care• Many of those in very poor health will

require long-term care institutional care, especially those suffering from Alzheimer’s disease, which is a major driver of demand.

• About 300 thousand people, 4.5% of those aged 65 and over, in England in 2010 were living in care homes; a further one million were receiving formal community care and two million receiving informal care (Commission on Funding of Care and Support, 2012, Vol. II).

Inequalities: Period life Inequalities: Period life expectancy for men at 65: by NS-expectancy for men at 65: by NS-

SEC, 1982 to 2006SEC, 1982 to 2006

Source: Longitudinal Study, Office for National Statistics

NS-SEC Period Increase

1982-86

2002-06

Years Per cent

1 Higher managerial and professional

15.2 18.8 3.6 23.7

2 Lower managerial and professional

15.1 18.2 3.1 20.5

3 Intermediate 13.9 17.5 3.6 25.94 Small employers and own account workers

14.0 17.5 3.5 25.0

5 Lower supervisory and technical

13.4 16.4 3.0 22.4

6 Semi routine 12.9 15.6 2.7 20.97 Routine 12.9 15.3 2.4 18.6

Conclusions: Some implications Conclusions: Some implications for the Twentieth-first centuryfor the Twentieth-first century

Some encouraging signs in health status, but even so highly likely there will be an absolute increase in years spent in poor health and possibly, the proportion also

Older people's perceptions of health status are often more optimistic than “objective” measures

Although “healthy ageing” and “well-being” are on the political agenda, actions so far have been limited

Need to acknowledge:shifts from acute to social carechanging patterns of chronic diseaseaverage age of those needing acute and social care will increase

“Tipping point” for availability of informal care will occur in near future.

References and References and sourcessources

• Age UK. various. Later Life in the United Kingdom, available at http://www.ageuk.org.uk/Documents/EN-GB/Factsheets/Later_Life_UK_factsheet.pdf?dtrk=true

• Banks, James, James Nazroo, Andrew Steptoe. 2012. The Dynamics of Ageing: Evidence from the English Longitudinal Study of Ageing 2002-10 (Wave 5), available at http://www.ifs.org.uk/ELSA/reportWave5

• Commission on Funding of Care and Support. 2012. Fairer Care Funding: The Report of the Commission on Funding of Care and Support (3 Volumes) “The Dilnot Commission”, available at http://webarchive.nationalarchives.gov.uk/20130221130239/http:/dilnotcommission.dh.gov.uk/

• Hills, John. 2010. An Anatomy of Economic Inequality in the UK - Report of the National Equality Panel. CASE report No. 60 http://sticerd.lse.ac.uk/dps/case/cr/CASEreport60.pdf

• House of Lords Select Committee on Public Service and Demographic Change. 2013. Ready for Ageing? Select Committee on Public Service and Demographic Change Report of Session 2012–13 Report, available at http://www.publications.parliament.uk/pa/ld201213/ldselect/ldpublic/140/140.pdf

• ILC-UK. 2013 . Ageing, longevity and demographic change, available at http://www.ilcuk.org.uk/index.php/publications

• Marmot, M et al. 2010. Fair Society Healthy Lives (The Marmot Review). Strategic review of health inequalities in England post-2010, available at http://www.instituteofhealthequity.org/projects/fair-society-healthy-lives-the-marmot-review

• Office for Budget responsibility. 2013. Fiscal sustainability report – July 2013 available at http://budgetresponsibility.independent.gov.uk/fiscal-sustainability-report-july-2013/

• Pensions Commission. 2005. A New Pension Settlement for the Twenty-First Century. The Second Report of the Pensions Commission, available at http://webarchive.nationalarchives.gov.uk/+/http:/www.dwp.gov.uk/publications/dwp/2005/pensionscommreport/main-report.pdf

• Sweiry, Daniel and Maxine Willitts. 2012 Attitudes to age in Britain 2010/11. Department for Work and Pensions. In-House Research No 7, available at http://research.dwp.gov.uk/asd/asd5/ih2011-2012/ihr7.pdf

Tim GosdenHead of Strategy for Individual Annuities

Legal & General

Role of the financial service industry in tackling the challenges


Role of the Industry in tackling the challenges

July 2013

60

Tim Gosden, Legal & General

Head of Strategy, Pension Annuities

Key Issues 61

DC pension provision

Underestimating life expectancy

Income in retirement

Phased/deferred retirement

Role of the industry

DC pensions 62

87% Final Salary pension schemes now closed

Defined Contribution’s 5-15% salary contribution

2012 average UK pension pot to buy an annuity was £33,000* (best income £1,900 per annum)

Q1 2013 - 80% of pension pots below £50,000*

Fund to purchase maximum basic state pension £110pw = £190,000

97% of Legal & General pension annuities are level with no inflation proofing

*Source ABI statistics

Life expectancy 63

Men aged 50-60 underestimate life expectancy by two years, while women underestimate by four years*

ONS male aged 65, life expectancy 83.2, female 85.8**

Legal & General estimate for a 65 year old DC member shopping around is on average to age 90

DC members, live on average 25 years in retirement

* Institute of Fiscal Studies

**ONS Interim Life Tables 2009 – 2011 England and Wales

Income in Retirement 64

Average UK working income £19,600pa*

Average UK retirement income (private and state) £11,600pa*

Average income people would feel comfortable living on at 70 years-old is £25,200** (cost circa £500,000)

1 in 5 saving nothing at all and 1 in 5 retiring with debts averaging £20,300**

The situation may only get worse

*HMRC Survey of personal incomes 2010/2011 (employment incomes, excludes other investments)

** Scottish Widows 2013 UK Pensions Report

Phased/Deferred Retirement65

Annuity and Drawdown Contracts sold

050000

100000150000200000250000300000350000400000450000500000

2008 2009 2010 2011 2012

Annuity

Drawdown

Source: ABI statistics

Retirement at 70 will be the 'new norm'66

“For a whole generation in their forties and fifties now, it is probably already too late. They are going to have to work to 70 or beyond before they can afford to retire.

For people in their twenties and thirties, there is still time to make a significant difference, but only if they can be persuaded to engage with their retirement savings.”

Tom McPhail, Hargreaves Lansdown. Telegraph, June 2013

Sting in the Tail 67

Healthy, 32%

Circulatory diseases, 10%

Other circulatory diseases &

diabetes, 21%

Co-morbid diseases, 6%

Neurological diseases;

MRSA; Arthritis, 15%

Cancer (incld. Benign

neoplasm), 7%

Respiratory diseases, 4% Other,

5%

For men aged 60-69, only 32% healthy*

Care funding in later life on average £750pw nursing home fees**

*Preliminary analysis performed by Legal & General using data from the General Practice Research Database. Data includes >1.5m patients registered with a general practice surgery in England (2007). Diseases examined include stroke, IHD, lung, colo-rectal and/or prostate cancer, Alzheimer’s disease etc. **Laing & Buisson care of elderly people market survey

Role of the industry 68

Education and awareness for all age groups

•Explain retirement and the stark realities we all face.

•Tell people the target minimum retirement income they need

•Reinforce the need for young people to act now and start saving

•Encourage more people to shop around for their retirement income

•Explain the benefits of annuities

More flexible regulations to make better use of existing assets

•More flexible income drawdown and annuity regulations so there is access to available assets for terminal illness/care funding

•Additional tax incentives

•Funds passing down generations

•Improved product design

Improve access to regulated professional advice

•Clearer sign posting to enable access to specialist retirement advice

Money isn’t everything! 69

Sardinia, Nuoro Province

‘Blue Zone’ where people live longer and happier lives than anywhere else.

Nearly10 times the number of centenarians per 1000 people than US.

70

This presentation contains confidential and proprietary information of Legal & General PLC (“L&G”). The presentation, and any opinions on financial products it contains, may not be modified, sold, or otherwise provided, in whole or in part, to any other person or

entity without L&G's written permission.

L&G makes no representations as to the accuracy or completeness of any of the information in this presentation and any liability on the part of L&G in relation to the inaccuracy or incompleteness of the information is excluded to the extent permitted by law. Nothing in

this presentation amounts to an offer, promise or advice.

Panel Debate and Q&A

Panellist

David SinclairAssistant Director, Policy and Communications

ILC-UK


Longevity, health and public policyHow should policy-makers respond

to increased longevity?Monday 22nd July 2013


policy debate: longevity, health and public policy. how should policy-makers respond to increased...

Economy & Finance