Yesterday the ONS published new numbers on anticipated life expectancy in the UK. Follow David Robbins’ thread for the significance of life expectancy to the recalculation of the state pension age.
1/X) It could be said that today’s ONS life expectancy projections point to State Pension Age starting to rise above 67 in 2054 and reaching 68 in 2056. [But I wouldn’t predict that, based on the context that follows.]
— David Robbins (@David_J_Robbins) January 12, 2022
David suggests that political and economic expediency will play a bigger part in the future of the SPA than the science and the Government have certainly given Lady Neville-Rolfe some wriggle room.
The third and fourth bullet are also important. The State Pension system is governed by life as well as death. The support for the state pension comes from those who are working and if we are looking as far forward as 2054-2056, for those who are yet to be born.
So we should be worried, when thinking of “sharing costs between generations” of those who are coming into life as well as those leaving it.
Back in 2014 the UK population was projected to be closing in on 75m by 2040.
Latest projections, released today, suggest we’ll have barely more than 70m people by then.
This is a big change.
Some will argue it’s good news. Others bad.
Either way, it’s enormously consequential. pic.twitter.com/MVVKDBVWmd
— Ed Conway (@EdConwaySky) January 12, 2022
The ONS numbers tell us a lot about fertility, apparently Scottish lassies bear fewer bairns than English roses. (I asked on twitter why this might be, one wag pointed to the migration of Andrew Young from Glasgow to Brighton …..follow the science!).
The fall in childbirth in the UK should be considered in the calculation of the SPA , and if it is, it points to a scientific, rather than an expedient, justification for pushing SPA back . If Scotland wants to devolve itself and manage its own SPA, then that’s fine by me.
On a more serious note, falling birth rates and an ageing population mean more people will die than are born annually by 2025, marking a long-term reversal of a historic trend.
Right now , our population continues to rise because of net migration but according to ONS projections, which are based on assumptions about fertility, mortality and migration, the total population taking into account migration would begin to shrink from 2058.
While migration is an economic matter, mortality and fertility are biological and need to be considered as different sides of the same coin.
I wonder about actuaries and death, it is almost as if they see the state pension as a closed pension scheme where new entrants don’t matter. Maybe de-risking has been so embedded into their thinking on pensions that the idea of an intergenerational pension with the young supporting the old with the idea of generations yet to be born, supporting them – is unconscionable.
If this is the case, they should get out more. There’s plenty of fun to be had in procreation and Britain needs new generations of actuaries as much as it needs improved birth rates!
For the avoidance of doubt, the author is not an actuary.
Our entire focus in pension funding work for national benefit systems is on the ability of new entrants to finance pension payouts. It is at the heart of all actuarial social security modelling.
I am sure that you are right but that more nuanced message is not getting out.
The noise in the market seems exclusively about the reduction in how long we live, nothing about fertility – https://inews.co.uk/news/state-pension-age-changes-dwp-increase-life-expectancy-declines-1397033 . If this is at the heart of actuarial modelling, I’d like to see some push back from IFOA and others on this. We have an investigation into this by Lady Neville Rolfe