I suspect that the article by Patrick Jenkins in today’s FT was prompted by our friend (LCP’s) Stuart McDonald. Patrick has “discovered” that American sixty year olds are taking to miracle cures like weight-loss drugs like Ozempic and Wegovy (semaglutides).
The fast-growing numbers of people taking this kind of medication — 6 per cent of Americans at the last count, equivalent to nearly one in six obese people in the country — means that the topic is starting to crop up in company results calls with analysts. Jenkins has clearly been talking to someone!
Some actuaries are starting to worry that the health upside for individuals could be so extreme that it upends insurers’ overall predictions about how long people will live — and thus how much money they will need to distribute to their clients before they die.
If that happens gradually, clients can expect insurers to cut future annuity rates, potentially exposing shortfalls in the value of individuals’ retirement pots.
If it happens quickly, significantly extending the life expectancy of every obese sixty something client after they have bought an annuity, for example, the burden could fall on insurers themselves, eating into capital buffers.
Given that the FT does a fine line in irony, I suspect that Patrick Jenkins and Stuart McDonald have had a quiet giggle in the corridors of Bracken House, are we really going to weep for insurers?
When Patrick hands over to Stuart we get this
One recent study by Lane Clark & Peacock suggested that the so-called hazard ratio, measuring the risk of death from any cause, shrank by 15 per cent over a four-year period for people with obesity who take a semaglutide versus a placebo. A separate three-year study in patients with pre-existing cardiovascular conditions found the likelihood of death, heart attack or stroke was 20 per cent lower.
Actually, the speed of longevity increasing has decreased as was reported on this blog last week. Young people are not doing so well and older people are doing as expected. I don’t suspect that L&G actuaries (interviewed in the FT) are overly worried of fatty puffs like me are going to cause them any problems. The take up of enhanced annuities for those with feeble life expectancy is tiny, most of us won’t take a bet against our living as long as we hope we will!
I have been taking a drug recently which my doctor tells me is reducing my cholesterol and my chance of keeling over from heart attack. When visiting the man doing my forthcoming bowel lazer attack, I was told that my alcohol free lifestyle was an assault on insurers (had he been talking to Stuart too?)
The kinds of conversation that Stuart , LCP, Patrick Jenkins and the FT are bringing to boardrooms should be important to ordinary mortals too. I’d like to think that we can start explain to bus-drivers and shop-fitters and people working in churches and in post rooms that pensions are actually a good thing because things like semaglutides will make a difference and we would be better insuring against living too long by buying into a pension.
I expect that those who run savings plans (as workplace pensions) just want to keep taking fees on our savings and not take risk that people might defy expectations and live for longer than expected.
But I hope that the DWP are busy writing a new rule for those who sell DC pensions, that they should provide them rather than just “freedom from pensions”.
Free read of Patrick Jenkins (and Stuart Macdonald)
If you have read as far as this, I can give you a treat – a free read of the Patrick Jenkins article (which is funny and insightful in equal parts). Using this link – you can read the Jenkin’s “opinion” peace for free
I am not sure the effect will be felt in the UK to the same extent as we are not accustomed to having to pay for our drugs, instead the NHS does.
Even in the US where drugs are usually funded by insurers, or Medicare for those with no insurance cover, I understand approximate half the GLP-1 drugs are purchased by individuals themselves (at about $1,000 per month). A recent US study has estimated the affordability to the Medicare system (now even more challenged by Trump/Musk) as follows:
– This study found that 3.6 million individuals (14.2%) were deemed highly likely to qualify for semaglutide treatment for the first time, and broadening the criteria for established CVD could increase this number to 15.2 million individuals (60.9%).
– If all newly eligible beneficiaries were to receive semaglutide treatment, Medicare spending could increase by $34-$145 billion annually.
– Even with more conservative definitions of CVD and a significant portion of individuals not maintaining long-term adherence to semaglutide treatment, costs could still increase by $10 billion annually.
– Younger, generally healthier, female Medicare beneficiaries were still likely to remain ineligible for semaglutide treatment according to the coverage provided by Part D Medicare plans.
The drug patents expire in the middle of the next decade, until then there is a flourishing market in counterfeit versions of doubtful efficacy and pressures on pensioners to spend a high proportion of their pension income on these drugs.
In the UK, the NHS has higher qualifying risk criteria for the prescription of similar drugs (in terms of a higher BMI threshold, diagnosed existing comorbidities, as well as a requirement to have tried alternative therapies first) so a smaller proportion of the general population is likely to be affected and those that are already suffer from other health problems, so the cohort effect is likely to be more limited.
Your bus-drivers and shop-fitters and people working in churches and in post rooms should still be encouraged to think about both the amount and the persistence of their pension income, especially if they have a new demand to spend it on drugs!
One bus company close to me (in more ways than one) uses “generous pension” as second in its recruitment drive after “competitive salary”.
http://www.stagecoachbus.com/careers/job/job_posting-3-41976
And driver wellbeing programmes are increasingly a feature of support which can be accessed if needed.
http://www.drivingforbetterbusiness.com/articles/driver-wellbeing-interventions-advice-ideas-suggestions-resources/
One bus company close to me (in more ways than one) uses “generous pension” as second in its recruitment drive after “competitive salary”.
stagecoachbus.com/careers/job/job_posting-3-41976
And driver wellbeing programmes are increasingly a feature of support which can be accessed if needed.
drivingforbetterbusiness.com/articles/driver-wellbeing-interventions-advice-ideas-suggestions-resources/
I think a lot of employer’s are missing a trick with pension provision. They (usually) have to pay a contribution anyway so why not make it a selling feature when recruiting? Otherwise the employee often (sadly) sees their contribution as a tax and the employer sees theirs as pure cost, with no benefit to them.
One bus company close to me (in more ways than one) uses “generous pension” as the second point in its recruitment offering after “competitive salary”.
https://www.stagecoachbus.com/careers/job/job_posting-3-41976
and driver wellbeing programmes are increasingly a feature of what’s available in terms of support:
https://www.drivingforbetterbusiness.com/articles/driver-wellbeing-interventions-advice-ideas-suggestions-resources/
One bus company close to me (in more ways than one) uses “generous pension” as second in its recruitment drive after “competitive salary”.
http://www.stagecoachbus.com/careers/job/job_posting-3-41976
And driver wellbeing programmes are increasingly a feature of support which can be accessed if needed.
http://www.drivingforbetterbusiness.com/articles/driver-wellbeing-interventions-advice-ideas-suggestions-resources/
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