The idea of a fixed term parliament is a good one, none of this uncertainty about when to call an election, everyone works with purpose to certain ends.
Life should be like , or death. Actuaries can tell you when you are likely to die (Sicilian actuaries will tell you the day).
My friend Mark Rowlinson has produced a death predictor, that allows you to work out how long you’ve left on the planet unless you do something stupid like giving up booze and fags (coffin dodging) or step under a London Bus (fast-track to Hades).
If you fancy having a go, you can press the link at the end of the blog- no cheating- you’ve got to read the bit in the middle.
The bit in the middle
Thanks for reading the bit in the middle- you can go and play with Mark’s death predictor or you can read the remaining three hundred words.
My occasional correspondent Per Andelius , has sent me an interesting paper from America,
HOW DO SUBJECTIVE LONGEVITY EXPECTATIONS INFLUENCE RETIREMENT PLANS?
I don’t suppose it’s the kind of question that you’ll be asked when you rock up for your Guidance session but anyone interested in how people take decisions on protecting themselves from the impact of living too long, should take some note.
The estimates in this paper suggest a large and statistically significant relationship between subjective life expectancy and retirement expectations: an individual who is one standard deviation more optimistic about living to age 75 has a greater probability of planning to work full time at 62 and 65 by 10 percent to 21 percent, respectively.
Respondents who are more optimistic about their survival to age 75 or 85 also expect to work five months longer on average.
We also find that increases over time in subjective life expectancy for a given individual are associated with increases in his planned retirement ages and expectations of working at older ages.
Finally, actual retirement behavior also increases with subjective life expectancy, but the relationship is somewhat weaker.
The results further our understanding of how survival and retirement expectations are “anchored” to the previous generation’s experience and suggest how targeted efforts at increasing knowledge about rising life expectancy may increase the proportion of younger cohorts who decide to work longer.
To translate this into everyday English (it’s written by an American Academic), this paper tells us that we view life expectancy based on our parent’s perceptions (who presumably took a cue from their parents).
Following this logic , we might expect us to still be thinking about life expectancy in biblical terms though I suspect that each generation nudges along a generation or two behind the curve.
But much more important is that when people wake up to the fact that they are likely to live longer than their DNA tells them, they adjust their behaviour and start acting a lot more “grown up”.
Which is important when we think about what this Guidance Guarantee is all about. Alan Higham reckons it’s about weeding out misconceptions and the most common misconception we have about death is that its a lot closer than it actually is.
If people use Mark’s death predictor , they may be horrified by their expected life expectancy. They may hand back the keys to the Lamborghini and take another look in the annuity showroom.
The best financial outcome for most people in later life is of course to work longer and the report suggests that once people have worked out that when they get to 60 they are only 2/3 of the way through life, they may think again about packing work in.
It took my Dad to retire at 57 to discover he didn’t like not working and it was 23 years later that he finally clocked off for the last time.
As each year went by , he seemed to grow a little more accustomed to the fact that he was not going anywhere fast and it’s only since he finally hung up his stethoscope at 80 that he’s started thinking about the imminence of his departure.
So I’m of a mind to suggest to my new buddies at the FCA that they commission this little bit of modelling and get those undergoing guidance the chance to work out how long they’re likely to live!
Perhaps that’ll curb the Lamborghini purchasing!
Mark’s Predictor only seems to work for the English, or we living in parts of England.
Is there no hope for the Irish, the Scots or the Welsh, Henry?
yours aye, George
Oh dear! I will speak with Mark about this. I suspect we need to diversify
I think there is a lot of sense in giving people a “lifetime prediction”. But it’s not a perfect solution, and there are flaws we need to be aware of. First, it’s just an average, and some will live for less, and some for longer. And that could be significantly longer. I like the way Mark’s predictor covers the statistical possibility of living to 100. These risks need to be drawn out. If you are aware you have a 15% chance of something happening you may adjust your behaviour and choose to cover/address that risk.
Also, this is not a one-off prediction. Firstly, because the longer you live, the longer you are predicted to live. So my life predictions at 40 and 60 and 70 were different. But secondly because things change. Medical factors change. Lifestyles change (for example we are eating considerably less salt than a few years ago). The way we predict lifespans change.
So, I guess what I am saying is that people need to regularly receive lifetime predictions. It’s should be for life, not just for retirement.
Great points Rachel, I suppose you are reinforcing the academic text which suggests that people’s saving and spending behaviours are influenced (positively) by engaging with their own longevity (as opposed to abstract concepts).
Do you think that there is a place for Mark’s calculator (or similar) in the Guidance sessions Guaranteed in the budget?
Very interesting article Henry. At ClubVita we specialise in longevity analysis and have a wealth of mortality experience spanning the entire UK. For anyone interested our website is http://www.clubvita.co.uk
I think as part of the guidance, people need an average life expectancy as a starting point. Mark’s calculator is good, but there are several out there if you google. Some are a lot more complicated asking for pages and pages of information! Which completely puts me off (and I’m interested in this). But we need significantly more information input than Mark’s current version.
The problem is firstly are people prepared to give the (personal) information to get the right level of answer (otherwise you end up with ‘mince in mince out’ – to use that delightful expression). And secondly, it will only give an average and some sort of stochastic modelling is needed to draw out the possibilities of living longer or shorter than that average.
Leaving aside the parochialism exhibited by the exclusion of anyone living outside England (roughly 50% of land area and 1/6 of UK population excluded) the results seem pretty encouraging, especially compared to some of the more lurid Internet death pages.
Whilst the prospect of 1/3 of life spent in retirement may frighten some, the difference across the UK as a whole means that this is less of a worry for those further north, and perhaps a greater regionalism in planning is required. However, most of us will live longer than the previous generation, and this is something both to be grateful and to plan for.
I have now spoken with the errant Rowlinson who informs me that the celtic fringes have been unintentionally excluded.
He assures me that messrs Kirrin and Llewelyn and other members of Greater England will be included shortly
Henry – you mention basing our subjective life expectancy on our parents, but in fact the problem is worse than that. Many current retirees parents are still alive, so they’re looking to their grandparents in their estimation of their own life expectancy, ignoring 30 years of exceptional change.
It’s a really good point, my father always makes reference to his father- and he’s a Doctor! This lag in recognising improved mortality seems to beset actuaries too, every GAD table for 100 years assumed a levelling off of life expectancy. the idea that the first 150 year old has already been born is a crazy notion- even if statistically probable!
For those Celts and Picts among the readership, the bug in the system has been fixed and you can now admit to your origins. Thanks Mark
Since my father lived a shorter span than his father, my expectations are low! The inclusion of the Scots in the calculator has had the expected negative effect on my prospects. (Before anyone thinks that’s a dig at my adopted home, my lifestyle makes more difference than my location)