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mortality in the third millennium

mortality in the third millennium. Richard Willets. mortality in the third millennium. In order to predict the future you need to understand the forces that have driven trends in past. Idea 1. mortality in the third millennium.

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mortality in the third millennium

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  1. mortalityin the third millennium Richard Willets

  2. mortalityin the third millennium • In order to predict the future you need to understand the forces that have driven trends in past Idea 1

  3. mortalityin the third millennium • Trends are best understood by looking at patterns in population experience Idea 2

  4. key conclusion • Mortality rates for elderly people are set to improve at a faster rate than ever before. • Life expectancy at retirement will surge upwards. • The new CMI basis will probably underestimate the extent of the improvement.

  5. mortalityin the third millennium • An overview of 20th century trends • Experience in the 1990s • Evidence backing the key conclusion • Mortality projection • Implications

  6. mortalityin the third millennium an overview of the 20th century

  7. an overview of the 20th century Between 1901 and 1991... • life expectancy for males increased from 45 to 73 years • the number of women reaching age 65 increased from 41% to 87% • mortality rates for young children have reduced by as much as 97%

  8. an overview of the 20th century Reduction in mortality rate between 1901 & 1991 - E&W pop data source: ONS

  9. mortalityin the third millennium experience in the 1990s

  10. experience in the 1990s Annual rates of mortality improvement (E&W pop) data source: ONS

  11. experience in the 1990s Annual rates of mortality improvement (E&W pop) data source: ONS

  12. experience in the 1990s Components of the improvements - males (E&W pop) data source: ONS

  13. annualised rates of heart disease mortality improvement England & Wales population - ages 65 to 69 data source: ONS

  14. mortalityin the third millennium evidence

  15. the cohort effect - males in E&W data source: ONS

  16. the cohort effect - females in E&W data source: ONS

  17. the cohort effect Possible explanations... • Second World War • diet • patterns of smoking behaviour • Welfare State but... • the effect can be seen independently in all the major health-related causes of death

  18. a Japanese cohort effect data source: JLTs

  19. the ageing of mortality improvement data source: ONS

  20. the ageing of mortality improvement data source: ONS

  21. the ageing of mortality improvement data source: ONS

  22. the ageing of mortality improvement Average annual rates of mortality improvement - females aged 70 to 99 - Denmark, Finland, Norway & Sweden source: Kannisto

  23. the ageing of mortality improvement • Scientific breakthroughs are occurring at a faster and faster pace • Human knowledge is doubling every 10 years • Computer power is doubling every 18 months • The Human Genome Project produced a first draft in 2000

  24. international experience Life expectancy at age 65 (years) data source: WHO

  25. mortalityin the next millennium mortality projection

  26. new CMI basis - CMIR17

  27. an alternative cohort basis • Rates are projected by year of birth • “Current” rates of improvement are based on 1992-97 rates for the E&W population • Improvement rates gradually move towards “long-term” values • “Long-term” rates are based on average rates for the period 1961 to 1997 • A loading of 25% is applied to convert to improvements suitable for annuitants

  28. comparison improvement rates in year 2000

  29. comparison improvement rates in year 2000 improvement rates in year 2020

  30. comparison improvement rates in year 2000 improvement rates in year 2020

  31. mortalityin the third millennium The new CMI basis is equivalent to: 1.1% p.a. improvements for a 65-year-old male The cohort basis is equivalent to: 2.4% p.a. improvements for a 65-year-old male

  32. alternative methodologies • Wide range of different approaches • Parametric methods • Projection by cause of death • Useful for assessing the reasonableness of mortality projections • Some methods suggest there is an element of “inevitability” about future improvement

  33. an element of inevitability “A degree of anticipation is possible within lifetimes….through those things which make an imprint on life at one point, and which are carried on into later life” Professor Michael Wadsworth

  34. example: projection of heart disease mortality by year of birth data source: ONS

  35. example: projection of heart disease mortality by year of birth data source: ONS

  36. mortalityin the next millennium implications

  37. implications for the annuity market Difference in annuity values: CMI vs cohort future mortality improvements Assumptions: Annuity values are for a single life male aged 65 - base experience is as per PMA92 - 1999 commencement

  38. implications for GAOs • If the cost of a 9:1 option for a male aged 65 is evaluated using a 5% interest rate and two mortality bases: • PMA80c2010 • PMA92 with cohort projection (vesting 2015) • The difference is….

  39. implications for GAOs • If the cost of a 9:1 option for a male aged 65 is evaluated using a 5% interest rate and two mortality bases: • PMA80c2010 • PMA92 with cohort projection (vesting 2015) • The difference is…. 82%

  40. implications for pensions • Some pension scheme liabilities may be underestimated by as much as 30% • Pension schemes may need to increase funding rates by as much as two thirds Assumptions: Liabilities = 3 times salary roll, current funding rate = 15%, average future working lifetime = 15 years, current mortality basis = PA(90)-2, actual mortality experience = PMA92 with cohort projection, current surplus = none, average scheme member = active male aged 50, spouses pension = 50%, real yield in retirement = 2%

  41. but... • Projections assume that research into the ageing process has no material impact • Is this likely...?

  42. anti-ageing research • “…if we develop ways to repair the ageing tissues with the help of embryonic cells, we could add 30 years to human life in the next decade. And beyond that, as we learn to control the genes involved in ageing, the possibilities of lengthening life appear practically unlimited.” • Dr William Regelson - Professor of Medicine • “The only practical limit to human lifespan is the limit of human technology.” Dr Michael Rose

  43. anti-ageing research • Telomerase - “the immortality enzyme” • “Gerentogenes” • Stem cells • Free radicals & antioxidants • Hormone treatments - e.g. DHEA • Caloric restriction

  44. implications • In a low inflationary environment the future has greater financial significance • The financial and social implications of future mortality change could be huge • More research is needed • Actuaries need to do this research

  45. mortalityin the third millennium Richard Willets

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