The UK governments Department for Work and Pensions has released some data showing their latest projections for how many citizens living in the UK will make it to age 100 and how many centenarians there will be in the future. The stark figures show longevity increasing rapidly and should serve as a warning to pension funds to get their plans in place to cope with an aging populace.
The research shows that more than 10 million people in the UK today can expect to see their 100th birthday, that’s 17% of the population. 3 million of these people are currently aged under 16, 5.5 million are aged between 16 and 50, and 1.3 million are aged between 51 and 65. Around 875,000 are already aged over 65.
Pensions Minister Steve Webb said: “These staggering figures really bring home how important it is to plan ahead for our later lives. Many millions of us will be spending around a third of our lives or more in retirement in the future. That’s why we are reforming the pension system to make it sustainable for the long term, making sure people can look forward to a decent state pension when they retire, and helping millions save into a workplace pension, many for the first time.”
Pension reform is just one piece of the puzzle required to address this issue. Longevity risk transfer is going to be essential for the pensions marketplace to continue to be effective in the future. The risk transfer market and capital markets are certainly going to be seeing a lot of interest in longevity risk transfer in the near future. As longevity risk becomes more important to manage we expect to see others attempting to replicate the recent Kortis Capital Ltd. longevity risk catastrophe bond from Swiss Re.
The graphs below show the scale of this issue facing the UK. And if it is facing the UK then you can be certain it is facing every other developed and developing country in the world.
The full report can be downloaded as a PDF here.