Will we live to 1000 or be wiped out in the next decade by an obesity pandemic? The answer is critical for the pensions industry, but experts fundamentally disagree, finds Sara Benwell
Longevity is one of the biggest questions overshadowing the pensions industry at the moment. In the DC world - it defines what people are actually going to need to save for retirement, while in the DB world, actuarial calculations are critical to understanding the cash flow requirements of individual schemes.
So it would be incredibly useful, for everyone involved, if we could calculate life expectancy with a reasonable degree of accuracy.
At the 12th annual international longevity risk and capital markets solutions conference, leading experts in longevity took to the stage to discuss how longevity has risen in the past and what that might mean for the future.
Unfortunately for the pensions industry, it turns out that the future of longevity is incredibly uncertain, and the experts predictions varied from a complete halt in longevity rises, to the possibility that we might all live for thousands of years or more.
The story so far
Historical increases in how long we all live can be explained by three main trends:
1) Reduction of death in infancy - a significant decrease in infant deaths led to much of the population living longer lives and a substantial increase in overall life expectancy
2) Public health awareness - increases of public health awareness including a wider understanding of sanitation, led to a significant decrease in people dying as a result of communicable and parasitic diseases, meaning more people started to reach old age
3) Beating cardio-vascular disease - the near elimination of cardio-vascular disease in more recent years has led to people reaching current later life expectancies with more people than ever before living to 100.
The University of Illinois’ Jay Olshansky, who took the stage first, said that we will see life expectancy begin to flatten.
He argued that since we will no longer see the steep decrease in cardio-vascular deaths, that there is no evidence to suggest that life expectancy will continue to rise, particularly since incidences of other later life diseases have stayed level or increased.
This means while we may continue to eliminate diseases one by one, we cannot change the biological facts of ageing, which mean that the older people are the more likely they are to suffer from multiple degenerative diseases.
He said: ”If we push out survival there is an underlying process of biological ageing that we have to acknowledge exists. If we don’t - I believe we will be missing an important part of the picture. We are now battling against ageing, when before we were battling against chronic and parasitic diseases.”
There is an underlying process of biological ageing that we have to acknowledge exists”
He also believes we are on the cusp of an obesity pandemic, which could - if not solved - have catastrophic consequences for human longevity.
However, Aubrey de Grey, chief science officer of the SENS research foundation, believes that the shift to a battle on ageing rather than disease provides the proof that medical science could soon take us to a place where people live for thousands of years.
He believes that new technologies such as gene therapy and stem cell research mean that at some point in the not so distant future we will see the first tranche of innovation that could see life expectancy increase by another 30 years. And once progress is made, it will continue to rise exponentially.
He said: ”Once we reach the point where the repair of damage is comprehensive we’re going to see a significant change… There is a limit to the length of time that people can live with the medical techniology we have today, but that’s because we can’t yet fix damage… Once we get the first 30 years we’re basically done.”
”The period of life expectancy will become incalculable because most people wll be expected to live longer than anyone has ever lived before.”
He thinks it could happen in the next 20 or 30 years, but that it could take up to 100. However, he believes what is critical for the pensions industry is when people start believing this change is coming, something he thinks will happen in the next decade.
Most people wll be expected to live longer than anyone has ever lived before.”
The companies that starting thinking about this now and developing products, are the ones that will make money, he concluded.
Vladimir Canudas-Romo, who works at thr Max Planck Odense Center on the biodemography of aging at the University of Southern Denmark, believes that longevity will continue to increase at much the rate that it has done in the past and points to social improvements as the factors that will explain this.
In particular, he believes that education will be critical. He said: ”In the future, we’re going to see a positive trend, and one of the reasons is beyond the biology, it’s the social aspect. Education is very important, and education is here to stay.”
As higher education is highly correlated with longevity, he believes the increase in people going to university across the globe will mean that people’s life expectancy will continue rising for the forseeable future, and points to Hong Kong as an example of a country where this theory is being borne out.
So what does this mean for schemes?
One area of agreements among the experts was that future life expectancy increases will look very different in the future than they have in the past.
Olshansky said: ”I think we all agree on one thing. The only way we can achieve any significant increases in life expectancy - is if new technologies are developed that don’t exist today.”
This means pension schemes need to broaden their view on longevity trends and keep an eye on advances in techology and medicine. This - as opposed to extrapolations from past increases in longevity - will be the best indicator of how long members are likely to live.
It also highlights the growing importance of hedging longevity risk, if there’s a chance that pensioners alive today could live to 1000 this clearly presents a real and present danger for schemes.
After all, there could be a time, not so far from now, where the schemes which have hedged longevity are sitting pretty, and those who have not are in real trouble.