LONGEVITY IN THE 21ST CENTURY By R. C. Willets, A. P. Gallop, P. A. Leandro, J. L. C. Lu, A. S. Macdonald, K. A. Miller, S. J. Richards, N. Robjohns, J. P. Ryan and H. R. Waters [Presented to the Faculty of Actuaries, 15 March 2004, and to the Institute of Actuaries, 26 April 2004]
abstract The main objective of this paper is to offer a detailed analysis of mortality change in the United Kingdom at the beginning the 21st century. Starting from an exploration of 20th century mortality trends, focusing in particular on the 1990s, underlying forces driving trends in longevity are discussed. These include the ‘cohort effect’ and the ‘ageing of mortality improvement.’ International mortality statistics and trends are also analysed. The pace of medical advances is discussed with specific focus on research into the ageing process and a potential treatment for cardiovascular disease. The paper also discusses the potential threat from infectious diseases. The analysis of underlying trends suggests that life expectancy in retirement in the U.K. is likely to increase rapidly in the early part of the 21st century. Some scientists are also claiming that we will be seeing the fruits of anti-ageing research within just a few decades. A core theme of the paper is that future projections should be grounded in as good an understanding of the past as possible. Different methods for projecting future rates of mortality are discussed and it is noted that emphasis should be placed on the uncertainty surrounding projections. The financial impact of using different assumptions for future mortality is explored. Significant differences in the cost of an annuity or pension arise from the use of the various projection bases. Life assurance companies have already declared significant losses as a result of strengthening reserves on annuity portfolios. Taken together, future increases in life expectancy, increasing awareness of the risk of providing longevity insurance, changes in legislation and shortages in market capacity and capital, may well lead to worsening annuity rates. It is difficult to assess the precise impact of future changes in life expectancy on final salary pension schemes. There is a lack of readily available information on the mortality assumptions being used in practice. It is therefore suggested that more disclosure in this area would be helpful. Employers sponsoring final salary schemes are making promises to their employees that extend up to 70 or 80 years into the future. Actuaries should be clear in spelling out to employers and trustees the nature of the risks behind the promises they are making. Future scheme design should reflect the possibility of substantial increases in life expectancy. An over-riding implication of the anticipated increases in life expectancy is that people will remain in work for longer in the future. The age at which people retire will inevitably have to increase and this trend will necessarily drive changes in all aspects of our society. As actuaries we have a vital role in helping to inform the wider debate.
keywords Mortality; Longevity; Ageing; Annuities; Cohort Effect
# Institute of Actuaries and Faculty of Actuaries
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Longevity in the 21st Century contact address
R. C. Willets, M.A., F.F.A., Willets Consulting, 1 Crealock Grove, Woodford Green, Essex IG8 9QZ, U.K. Tel: +44(0)2085059006; E-mail:
[email protected]
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Introduction
1.1 Introduction 1.1.1 As a subject for research, human longevity is vast topic. Mortality rates are bare statistics that reflect the evolution of our society. During the 20th century huge increases in life expectancy have followed medical and scientific breakthroughs mostly unimagined a hundred years ago. 1.1.2 Some scientists are now predicting enormous extensions in our potential lifespan and mortality tables published in recent years have included substantial allowances for future improvement. Mortality improvements in the 21st century could have enormous social and financial implications. 1.1.3 The purpose of this paper is to analyse how mortality in the United Kingdom is likely to change in future years. Underpinning the report is a desire to draw out the key trends and the major forces that are likely to drive future shifts in mortality. 1.1.4 Whilst the analysis of past experience covers all adult ages, the later sections of this paper focus more on the mortality of older people and in particular life expectancy in retirement. This particular emphasis has been chosen because the implications of mortality change at higher ages are currently of particular interest to life assurance companies and pension schemes. 1.1.5 A cross board working party was established to produce this paper, which has been sponsored by the Social Policy Board. The working party was formed, partly to provide a review of mortality matters for the actuarial profession, and partly to help to counter criticisms from outside the profession that actuaries have been failing to keep up with likely changes in life expectancy. 1.1.6 This paper takes forward some of the ideas originally outlined in ‘Mortality in the Next Millennium’ (Willets, 1999) and reflects the latest mortality data and recent developments in medicine, demography and actuarial science. However, the intention is to substantially build upon the work of the earlier paper, rather than simply provide an update. 1.2 Contents 1.2.1 The paper has been divided into six main sections: ö Section 2, 20th Century Trends: a discussion of how and why mortality rates in the U.K. have changed over the course of the 20th century, and in particular during the 1990s. Five key forces behind the recent changes are identified.
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ö Section 3, International Experience: an analysis of how U.K. mortality experience and improvement rates compare with data from other countries. ö Section 4, Medical Advances: a discussion of how advances in medical science are likely to impact the pace of future improvements in longevity. The section focuses on two main areas: potential developments in the treatment of heart disease and research into the ageing process. ö Section 5, The Threat from Infectious Diseases: an examination of possible threats to the health of our society: including AIDS, new variant CJD, antibacterial resistance and emerging diseases. ö Section 6, Projecting the Future: a discussion of the likely pattern of future mortality improvement and different methods of mortality projection. This section makes reference to a working paper by the Continuous Mortality Investigation (C.M.I.) Bureau Working Party on mortality projection due to be published early in 2004. In addition to this, various projections are compared, including the interim C.M.I. cohort bases published in 2002 and the Government Actuary’s Department (GAD) basis issued in December 2003. ö Section 7, Implications: an assessment of the likely implications of future mortality change for life assurance companies, general insurers, pension schemes, society in general and the actuarial profession. 1.3 Appendices The paper also has two appendices which contain more detailed information on two particular topics. Appendix 1 explores recent trends in mortality in England and Wales by cause of death. Appendix 2 examines the threat from infectious diseases in detail.
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Æòth Century Trends
2.1 Introduction 2.1.1 The purpose of this section is to describe how mortality in the U.K. has changed during the 20th century. The analysis concentrates mainly on death rates for adults, since the mortality of children has a fairly limited impact on pensions and life insurance. In many instances, population mortality data for England and Wales, rather than for the whole of the U.K., has been used. This reflects the fact that figures are often more readily, or only, available in this format. 2.1.2 Past trends are analysed, with particular emphasis placed on describing the changes that have occurred during the 1990s and outlining the major factors influencing mortality change at the beginning of the 21st century. Five key forces behind the recent improvements are identified.
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2.2 A Brief Overview of the 20th Century 2.2.1 Over the course of the 20th century mortality in the U.K. has improved to an amazing degree. We now live an entirely different kind of life and think of death in a completely different way to those alive at the beginning of the previous century. 2.2.2 In 1901 life expectancy at birth in England and Wales was 46 years for males and 50 years for females (O.N.S., 1997). By 2001 ö just a century on ö these figures had increased to 76 and 81 years respectively (GAD, 2003). 2.2.3 At the beginning of the 20th century 16% of new-born boys and 13% of new-born girls would not survive their first year of life. By 2001 both these figures had reduced to well under 1% (GAD, 2003). Moreover, in 1901 only 36% of males and 43% of females could expect to reach age 65. By 2001 these survival rates had increased to 83% and 89% respectively (GAD, 2003). 2.2.4 We are now unfortunate not to reach retirement age. In fact most of us probably expect to reach our 60s, 70s or even 80s. Table 2.2a illustrates the extent to which mortality rates improved between 1901 and 2001. 2.2.5 The improvements have clearly been substantial at all ages, although the youngest ages have seen the greatest reductions. The 98% reduction for 5-year-olds means that the mortality rate for this age group is now just 2% of the rate at the beginning of the 20th century. In fact, there is a very clear correlation between age and the degree to which mortality has improved. For elderly people, especially men, the improvement has been more modest, though still significant. 2.2.6 The most important factor driving these mortality improvements was the conquest of infectious diseases. This was the single biggest health success of the 20th century. At the turn of the century diseases such as tuberculosis, typhoid, measles, scarlet fever and diphtheria exacted a terrible toll. This is illustrated by Table 2.2b, which shows the proportion of all deaths, at various ages, due to infectious diseases.
Table 2.2a.
Reduction in mortality rate between 1901 and 2001, England and Wales population Age
Reduction in mortality rate Male Female
5 98% 98% 25 82% 92% 45 80% 83% 65 63% 71% 85 37% 49% Own figures ö data source: ELT7 (1901-10) and GAD Interim Life Tables 2000-02
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Table 2.2b. Proportion of all deaths due to infectious diseases in the period 1901 to 1910 and for 2001, England and Wales population Proportion of deaths due to infectious diseases 1901-10 2001 Age group 1-14 15-44 44-64 65 and over
Male 43% 46% 16% 4%
Female 47% 49% 11% 5%
Male 6% 2%
