 Pension seminar 2004 CURRENT ISSUES IN MORTALITY Dublin – 1 June 2004 Tony Leandro

Key >4.2% 4.2% 3.6% 3.0% 2.4% 1.8% 1.2% 0.6% 0% -0.6% -1.2% <-1.2% Age GAD Contour map Males, England & Wales

Age Key Local Peak > 1.5% >4.2% 4.2% 3.6% 3.0% 2.4% 1.8% 1.2% 0.6% 0% -0.6% -1.2% <-1.2% Contour map of 2D graduation Assured lives, males, all durations

Expectation of life for males aged a(55)M PA(90)M PMA80 PMA92 PMA92mc PMA92lc PMA92sc Expectation of Life Times mc 1999 lc

u=2000u=2010 PA(90)-2100% PA(90)-4107% PMA92117%121% PMA92 pilot112%118% PMA92mc128%131% PMA92mc pilot124%128% Financial effects, Males aged 65, 3%

year PMA92 (u=year)mc PMA92 (u=year)mc pilot %-2.5% %-2.5% %-2.8% %-2.8% Financial effects, interest adjust. from PA(90)-2, Males aged 65, 3%

Current issues in mortality - Agenda n Update on self-administered pensioner investigation n Update on CMI investigations nData collection nThe work of the Working Parties n Some observations on projecting mortality

The SAPS mortality investigation - Summary n 99 Schemes n Number of records in database 1.04m n 6 largest schemes cover 50% of the data n 9 Consultancies have contributed data n Data for 1996 to 2003 n 13 industry types, significant amounts of data for 7 n Lots of data categories

Data collection cycle

The SAPS mortality investigation - Males LivesAmounts (£’000) Average Exposure ,5702,803,9376, ,1033,404,4616, ,2833,045,7847,388 All1,395,9579,254,1816,629 Deaths200016,46670,2454, ,86388,6214, ,62273,0684,997 All50,951231,9354,552

The SAPS mortality investigation - Females LivesAmounts (£’000) Average Exposure ,681840,3322, ,510973,5042, ,597819,4773,074 All959,7882,633,3132,744 Deaths200011,13724,2262, ,36429,5712, ,06426,3022,613 All34,56580,0992,317

Mortality of self-administered pensioners All retirements : Males : Lives Age

Mortality of self-administered pensioners All retirements : Males : Lives Age

Mortality of self-administered pensioners All retirements : Males : Amounts Age

Mortality of self-administered pensioners All retirements : Males : Amounts Age

Mortality of self-administered pensioners All retirements : Females : Lives Age

Mortality of self-administered pensioners All retirements : Females : Lives Age

Mortality of self-administered pensioners All retirements : Females : Amounts Age

Mortality of self-administered pensioners All retirements : Females : Amounts Age

Mortality of self-administered pensioners Dependants : Females : Lives Age

Mortality of self-administered pensioners Dependants : Females : Amounts Age

Mortality of self-administered pensioners Normal : Males : Lives v Amounts (on PML92) Age

Status of CMI Data collection n Have reported on 2002 and Quad to life offices n Data problems do exist n Quad is complete

Life Office Pensioners 100A/E using the “92” Series projected mortality rates : Males

Life Office Pensioners 100A/E using the “92” Series projected mortality rates : Females

Life Office Pensioners 100A/E using the “92” Series - medium cohort, projected mortality rates : Males

Life Office Pensioners 100A/E using the “92” Series - medium cohort, projected mortality rates : Females

Work on the “00” Series mortality tables n Graduation Working Party nWhich tables (not too many!) nHow should they relate to each other nDurations, lives and amounts n Experience paper (a CMIR) nProjections Working Part nWP3 out now(?)

The work of the projections working party n Behaviour of different mortality models nDifference between graduation and projection n Effect of size of data set on results nConsidering how to derive “error” range on projection nModel error nParameter error nData error

What you need to attempt mortality forecasts (In the absence of a crystal ball ) n... how individual genes affect the ageing process n …how various risk factors affect the ageing process n … how soon can medical technology reduce the effects of ageing n … the impact of lifestyle changes on the various risk factors nUnderstanding of the ageing process

Why projections will not be met nMedical technology improvements nEarlier medical interventions to reduce tissue damage nStalling or reversal of ageing processes nHidden diseases of old age nEpidemics nLifestyle changes n Better diets due to health education n Increased intake of vitamins and micro nutrients n Increasing obesity

Variation by smoker status, , Males (AM92) Age

Variation by smoker status, , Females (AF92) Age

Mortality by social class

Claims by cause as percentage of All Claims Critical Illness v Life Assurance - Males % Cause of Claim / Death Life Assurance Critical Illness

Claims by Cause as percentage of All Claims Critical Illness v Life Assurance - Females % Cause of Claim / Death Life Assurance Critical Illness

Expectation of life at age 65 in 2000 CountryMaleFemaleCountryMaleFemale Japan Greece France Norway Switzerland Belgium Australia Austria Sweden Denmark Israel Netherlands New Zealand Finland Italy United Kingdom Spain Germany USA Portugal Canada Ireland Singapore

Projection methodologies Process-based Explanatory-based Extrapolative

Fitted and projected model of larger (top) and smaller (bottom) mortality experience. P-spline model with separate smoothing parameters. 95% c.i.s shown.

Fitted and projected model of larger (top) and smaller (bottom) mortality experience. P-spline model with smoothing parameter chosen to favour goodness-of-fit. 95% c.i.s shown.

Fitted and projected model log μ 65 (t) = a + log μ 65 (t) of larger (top) and smaller (bottom) mortality experience. P-spline model with smoothing parameter chosen to favour goodness-of-fit. 95% c.i.s shown.

Things to read nWorking paper 3 – projections nWorking paper 4 – SAPS investigation nWorking paper 8 – Which tables? nLongevity in the 21 st Century nPlus more to come … nWorking paper 1&2 (SIAS paper) – cohort

Summary nFalling inflation has magnified the financial effect of this nIt is likely that this mortality trend will continue nIt is possible that medical science will provide a dramatic step forward nAny forecast will be wrong – the range of possible results is wide nThe financial consequences are equally uncertain nIn recent years mortality rates have improved very quickly

 Pension seminar 2004 CURRENT ISSUES IN MORTALITY Dublin – 1 June 2004 Tony Leandro