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The Actuary The magazine of the Institute & Faculty of Actuaries

Sixty-five and not out!

A major benefit to the profession in
holding its second ageing popula-
tion conference was to meet
people from other professions with different perspectives on ageing. In this we were aided by Dr Sarah Harper and the Oxford Institute of Ageing, the profession’s conference partner.

Half full
Frank Field opened the batting for the pessimists by talking about life after Turner and describing the cul-de-sac that government pensions policy is in. The problems arise from the decline in the number of people contributing to occupational pensions, the small impact of stakeholder pensions and the growing cost of pensions provision. This calls for new ways to encourage pension savings and the reinvention of government policy. Frank updated us on his proposals for the universal protected pension, a pension scheme run by a body independent of government, and entertained us with humorous portraits of leading figures.

Catching a ball
Speaking for the optimists, Andrew Dilnot surprised everyone by bowling his wallet to someone sitting in the fifth row who caught it! The point was that we behave instinctively in markets, much as we catch a ball. Building on this, Andrew presented the case that people are accumulating more personal wealth and savings than expected, with the largest savings among the over-65s. However, wealth is heavily skewed towards the rich, suggesting that more effective pensions and savings policies are needed for poorer groups.

Philip Booth’s more pessimistic take, drawing on public choice economics, was that pensions are stuck in a quagmire, embroiled in government-imposed complexity. The answer is more streamlining in the form of a single contributory pension payable from age 70, a single means-tested benefit unrelated to age, more contracting-out, and less pensions regulation. Interestingly, he questioned the simplistic appeal of a citizens pension. Les Mayhew provided a cautious look at the contribution of immigration to the UK state pension, and Deborah Cooper modelled personal debt across the life cycle in preparation for retirement.

The body’s warranty period
Turning to the future of longevity, the pessimists played their international big-hitter, Jay Olshansky, who in his plenary took a debunking swipe at the optimist’s case for ever- increasing longevity. Jay’s analogy was the time taken to run a mile. Extrapolating from the last 50 years, the one-minute mile will be reached in 2420, with the instantaneous mile being achieved in 2580! Against these wild extrapolations, he proposed that the duration of life is calibrated to the onset and length of a species’ reproductive window an evolutionary constant remarkably consistent across different species. It followed that ‘ageing is an accident of surviving beyond the warranty period for living machines’. The trend towards obesity was one way that humans were pushing the body beyond its warranty period and possibly shortening the recent gains in longevity.
Andrew Harrop put the supply-side value of the unpaid labour of elderly people, such as grandparent care and volunteering, at £24bn or 3% of GDP. If current progress in absorbing different age groups into paid and voluntary employment is sustained with 1.5m more over-50s in work between 1997 and 2005 employment growth will be more than enough to cope with population ageing.
Donald Hirsch took a demand-side look at the implications of the disappearing age pyramid for how far we can modify our expectation of growth as people live longer. He described the potential for distributing increasing resources across the generations for economic transfer, human development, care provision, housing, converting assets into income and for developing public provision distributed in new ways so foreseeing possibilities for positive social change.

Five forces
Adrian Gallop described five forces shaping 20th-century mortality: the UK cohort effect, mortality improvement, past patterns of cigarette-smoking, increased uncertainty at younger ages, and widening socio-economic class differentials. The future of longevity looks less certain, with increasing mortality at younger ages and the possible return of infectious killer diseases, countered by improvements in medical advances.

Countdown or golf?
Des Le Grys presented findings from a recent Age Concern England study showing that most over-45s were optimistic about the future, with over half having no longstanding illness and feeling financially secure. The research identified several social groups, ranging from the heydayers satisfied with life and looking to the future with contentment, through the fulfilled positive about ageing with no particular health or financial concerns, to the countdowners the oldest and most passive group, living with low income and health problems and almost giving up on life. Happiest were the golfers Growing Older but Looking Forward to Enjoying Retirement.
In cricket, two sides compete to win. In this conference the optimists and pessimists presented different views for the audience to form their own judgements on. Most agreed that the ageing population is an age of opportunity where 65 years is certainly not out, as Harvie Brown’s summing-up showed.