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The longer you live, the more you must save

Insurers prepare for 120-year-old customers

Gulf News

Britain’s oldest man, Reg Dean, has celebrated his 110th birthday. But it may not be long before he is overtaken in the age stakes by a new breed of “supercentenarians”. The boss of one of Britain’s main financial bodies has revealed that several insurers are currently modelling pension products on the basis that their customers could reach the age of 120 or even 125.

Speaking to hundreds of actuaries at a conference, Otto Thoresen, director general of the Association of British Insurers, added that within our lifetime it will be “the norm” for people to live to 100 or more. But this, he said, threw up huge challenges in terms of getting people to save more for what may end up being a very long retirement.

Life expectancy has been growing steadily for decades, and the government has already predicted that 27% of today’s under-16s will reach 100 a total of 3.3 million people.

Born in November 1902, former church minister Reg Dean, from Wirksworth, Derbyshire, is the first British man born in the 20th century to become a supercentenarian someone who has reached the age of 110 but he won’t be the last. Legal General on Tuesday quoted Office for National Statistics data showing that the number of UK people aged 100 or more has increased five-fold from 2,500 in 1980 to 12,640 in 2010 and said that projections suggest the number of centenarians in the UK will exceed 160,000 by mid-2040.

During his speech in Brussels, Thoresen said the independent Office for Budget Responsibility had identified the ageing population as “one of the greatest threats to the UK’s fiscal sustainability in the next 50 years”.

He added: “I know of several insurers, and you may be among them, who are now modelling pensions and retirement savings products on the assumption that customers could live to be 120 or 125 and with very different patterns of retirement. With men and women living on average 30 years longer than they did 100 years ago, by 2100, people living to over 100 years old will be the norm. How will we ensure that mankind’s greatest achievement of prolonging life in this way doesn’t lead to poverty for millions of people, and health and social care systems which cannot cope with the increased demands being made of them?”

He set out a plan to tackle the UK “savings gap” through pension charges that are clear and easily understood to be value for money; investment options that are transparent and relevant to savers; better communication with customers; a more flexible approach to help people approaching retirement understand the options available; and “adaptable post-retirement options to meet changing financial challenges, such as costs of funding long-term care”.

Guardian News and Media 2012