Facing up to uncertain life expectancy: the longevity fan charts

Good Practice Principles in Modelling Defined Contribution Pension Plans

We establish 16 good practice principles for modelling defined contribution pension plans. These principles cover the following issues: model specification and calibration; modelling quantifiable uncertainty; modelling member choices; modelling member characteristics, such as occupation and gender; modelling plan charges; modelling longevity risk; modelling the post-retirement period; integrating the pre- and post-retirement periods; modelling additional sources of income, such as the state pension and equity release; modelling extraneous factors, such as unemployment risk, activity rates, taxes and entitlements; scenario analysis and stress testing; periodic updating of the model and changing assumptions; and overall fitness for purpose.

Caste, religion and regional differentials in life expectancy at birth in India: cross-sectional estimates from recent National Family Health Survey

OBJECTIVE

Though estimates of longevity are available by states, age, sex and place of residence in India, disaggregated estimates by social and economic groups are limited. This study estimates the life expectancy at birth and premature mortality by caste, religion and regions of India.

DESIGN

This study primarily used cross-sectional data from the National Family Health Survey (NFHS-4), 2015-2016 and the Sample Registration System (SRS), 2011-2015. The NFHS-4 is the largest ever demographic and health survey covering 601 509 households and 811 808 individuals across all states and union territories in India.

MEASURES

The abridged life table is constructed to estimate the life expectancy at birth, adult mortality (45q15) and premature mortality (70q0) by caste, religion and region.

RESULTS

Life expectancy at birth was estimated at 63.1 years (95% CI 62.60 -63.64) for scheduled castes (SC), 64.0 years (95% CI 63.25 - 64.88) for scheduled tribes (ST), 65.1 years (95% CI 64.69 - 65.42) for other backward classes (OBC) and 68.0 years (95% CI 67.44 - 68.45) for others. The life expectancy at birth was higher among o Christians 68.1 years (95% CI 66.44 - 69.60) than Muslims 66.0 years (95% CI 65.29 - 66.54) and Hindus 65.0 years (95% CI 64.74 -65.22). Life expectancy at birth was higher among females than among males across social groups in India. Premature mortality was higher among SC (0.382), followed by ST (0.381), OBC (0.344) and others (0.301). The regional variation in life expectancy by age and sex is large.

CONCLUSION

In India, social and religious differentials in life expectancy by sex are modest and need to be investigated among poor and rich within these groups. Premature mortality and adult mortality are also high across social and religious groups.

Financing later life: why financial capability agendas may be problematic

Purpose

– The purpose of this paper is to examine the language and cultural assumptions that government uses when proposing policy reforms for the financing of later life, especially in promoting the financial capability of citizens. The author asks what the implications of this political construction are for society.

Design/methodology/approach

– The author examines UK government policy documents from the foundation of the Financial Services Authority in 1997 until 2013. The author analyses these documents to understand the discourses of government for the financing of later life, how powerful these discourses are, and what influence they have on policy and society.

Findings

– The paper shows that the government considers the promotion of the financial capability agenda to be a solution to structural problems in the provision of old age welfare. By controlling the discourse, non-market-based discussions of welfare are closed and any need for examination of the structural causes of inequality in old age is made invisible. The discourse prevents critique of the individualisation of risk and market provided welfare and service delivery, and failures of policy become the failures of individuals as both consumers and regulators.

Originality/value

– The financial capability agenda sounds so sensible and has enrolled so many different organisations in its delivery that it is rare to reflect on the cultural and political assumptions that lie behind these discourses. When these are analysed, the author observes that individualised discourses surrounding money and welfare in later life are so powerful that more collective solutions to issues of financial welfare are closed off from public debate and discussion.

Longevity expectations in the pension fund, insurance, and employee benefits industries

Considerable progress has been made in many areas of biomedical science since the 1960s, suggesting likely increases in life expectancy and decreases in morbidity and mortality in the adult population. These changes may pose substantial risks to the pensions and benefits industries. While there is no significant statistical evidence demonstrating rapid decreases in mortality rates, there are conflicting opinions among demographers and biogerontologists on the biological limits of the human lifespan and trends in life expectancy. We administered a survey of the International Employee Benefits Association (IEBA), a large, international industry group. Industry professionals employed by consulting (35%), insurance (24%), pension (14%), and other (27%) companies responded to 32 questions. Respondents showed reasonably conservative views on the future of longevity and retirement, including that for women. The respondents formed their personal longevity expectations based on their family history and, to a lesser degree, on the actuarial life tables. Most of the sample expressed no desire to life past age 100 years, even if the enabling technologies required to maintain a healthy youthful state were available, and only a few respondents in the sample expressed a desire to live for the maximum period (at least) offered by the survey question. The majority of the respondents would not undergo any invasive procedures, and only 56% of the respondents would opt for noninvasive therapies to extend their healthy lifespans to 150 years of age if these were available.

Mandatory aged care insurance: a case for Australia

This paper assesses the feasibility and welfare-improving potential of an insurance market for aged care expenses in Australia. As in many other countries, demographic dynamics coupled with an upward trend in costs of personal care result in consumer co-contributions imposing a risk of expenses that could constitute a significant proportion of lifetime savings, in spite of the presence of a government-run aged care scheme. We explore issues around the development of an insurance market in this particular setting, considering adverse selection, moral hazard, timing of purchase, transaction costs and correlation of risks, as well as such contextual factors as longevity and aged care cost determinants. The analysis indicates aged care insurance is both feasible and welfare-enhancing, thus providing a gainful alternative to the aged care reform proposed by the Productivity Commission in 2011. However, while the insurance market would benefit the ageing Australian population, it is unlikely to emerge spontaneously because of the problem of myopic individual perceptions of long-term goals. Consequently, we recommend regulatory action to trigger the market development.

Bayesian probabilistic projections of life expectancy for all countries

We propose a Bayesian hierarchical model for producing probabilistic forecasts of male period life expectancy at birth for all the countries of the world to 2100. Such forecasts would be an input to the production of probabilistic population projections for all countries, which is currently being considered by the United Nations. To evaluate the method, we conducted an out-of-sample cross-validation experiment, fitting the model to the data from 1950-1995 and using the estimated model to forecast for the subsequent 10 years. The 10-year predictions had a mean absolute error of about 1 year, about 40 % less than the current UN methodology. The probabilistic forecasts were calibrated in the sense that, for example, the 80 % prediction intervals contained the truth about 80 % of the time. We illustrate our method with results from Madagascar (a typical country with steadily improving life expectancy), Latvia (a country that has had a mortality crisis), and Japan (a leading country). We also show aggregated results for South Asia, a region with eight countries. Free, publicly available R software packages called bayesLife and bayesDem are available to implement the method.

Modeling and Forecasting Health Expectancy: Theoretical Framework and Application

Life expectancy continues to grow in most Western countries; however, a major remaining question is whether longer life expectancy will be associated with more or fewer life years spent with poor health. Therefore, complementing forecasts of life expectancy with forecasts of health expectancies is useful. To forecast health expectancy, an extension of the stochastic extrapolative models developed for forecasting total life expectancy could be applied, but instead of projecting total mortality and using regular life tables, one could project transition probabilities between health states simultaneously and use multistate life table methods. In this article, we present a theoretical framework for a multistate life table model in which the transition probabilities depend on age and calendar time. The goal of our study is to describe a model that projects transition probabilities by the Lee-Carter method, and to illustrate how it can be used to forecast future health expectancy with prediction intervals around the estimates. We applied the method to data on the Dutch population aged 55 and older, and projected transition probabilities until 2030 to obtain forecasts of life expectancy, disability-free life expectancy, and probability of compression of disability.