Longevity risk debate: How pension schemes cope with an ageing population

RW, Paternoster A decrease in circulatory diseases – heart disease and stroke – have contributed to about two-thirds of the total improvement. The most significant reason for this is that far fewer people now smoke. But there are also a number of other factors: average population blood pressure and cholesterol have fallen, treatments for people who actually have heart disease are completely different to what they were 10 or 20 years ago, with bypass surgeries and angioplasties. More recently, we’ve also seen improvements in other causes of death. Improvements in survival rates for cancer have helped to drive mortality improvements.

PK, Watson Wyatt And in terms of the so-called cohort effect in the UK – the faster mortality improvements for people born between around 1925 and 1945. What are the drivers in relation to that?

RW, Paternoster I think most people would argue that the changes in smoking have been the most significant factor behind the cohort trends. The generation reaching adulthood after World War II were more aware of the negative effects of smoking, whereas the previous generation were the ones that were given free cigarettes as members of the armed forces.

PK, Watson Wyatt And that throws up an interesting question, of course. Because, although as anyone who’s ever tried to give up smoking will know, you may need to give up more than once before you finally succeed, your health and therefore how long you live can only ever benefit from giving up smoking once. This raises the question of whether these improvements will continue?

RW, Paternoster Yes, absolutely, the drivers of future mortality improvement are likely to be quite different to the drivers of past improvement.

AR, Credit Suisse It may be a bit too early to measure the effect of smoking bans in public places. That could be a driver of future improvements in years to come.

JL, Legal & General I think smoking is one of the many reasons. There are many other potential reasons. ranging from changes in technology, behaviour, lifestyle, working conditions, healthcare and medical advances. I was told that in the 1950s only 2% of the population had central heating, but today it’s 98%. When people get cold they increase their chance of getting high blood pressure. This could contribute to strokes or heart attacks. And there are other things like changes of nutritional uptake over time. For example, with the availability of refrigerators, people don’t have to rely on salted meat. There’s a professor who keeps telling me that it’s not about smoking. He’s an expert in Japanese population. He said that the Japanese still smoke like chimneys but they have experienced a large reduction in mortality. They have got cohort effect (just like the UK) and are one of the longest-living peoples in the world. There are many other factors that have contributed to the increase in life expectancy but they have not been studied extensively.

DR, Watson Wyatt Although the "golden cohort" generation has benefited significantly compared with previous generations, the following generation shows continuing mortality improvements. It implies that each development, whether relating to risk factors or treatment, is consolidated, and changes the bar of people’s expectations. The current emphasis is on cancer treatment and how that can be improved. Among the main drivers for cardiovascular mortality improvements were relatively simple treatments, more so than complex operations. It is not clear whether treatments for other causes of death will also be widely available or whether the associated cost will restrict their availability. If the latter, this could lead to a widening gap of expectations between the general population and those in pension schemes or with insurance policies.

PK, Watson Wyatt  When we talk about things like obesity, the question is: will that actually impact on the fundamentally closed group of people who are in defined benefit pension schemes?

AR, Credit Suisse Indeed. Studies show that the highest incidences of obesity are in the lowest socio-economic groups and the highest membership of final salary pension schemes is in the higher socio-economic groups.

PK, Watson Wyatt Joseph, you mentioned some of the things that are happening internationally in terms of mortality.

JL, Legal & General I’ve looked at the changes in death according to some of the major causes of death (circulatory diseases, cancers and "other" diseases) of seven developed countries. I observe that there has been a large fall in deaths relating to circulatory diseases over the past 20 years in all the countries under study – UK, Japan, US, Germany, Sweden, France and Canada. There has not been much fall in cancer deaths. So I think the phenomenon that we see is something that can be seen worldwide.

However, there are also different trends in various countries. In Canada, for example, the improvement there has slowed down because, as circulatory deaths reduce, they exhausted that cause. In Japan, the death rates are still falling. That leads to the question: Is there a limit to life expectancy? I think there is a limit, because there are some insects that live for a few days, mice live for three years, dogs 12, 15 years. There’s a limit to this improvement, in life expectancy, unless some major intervention in our species occurs.