Prosper and Live Longer? – It looks that way!

I learned recently, in an excellent SOLLA Pensions Update webinar lead by Nigel Barlow, that the Stochastic nature of life expectancy (LE) means that 25% of males at age 65 (2.75million) could live as much as 7 years longer than the average LE of 85 years.

I did some further digging¹ and found that 10% (1.1mn) will live to 96! According to the ONS, this is because of the causal relationship between socio-economic status and life expectancy leading to a generally longer than average life for those in higher managerial and professional occupations ((NS-SEC) class 1) = Higher Net Worth individuals, and equally a shorter life for routine occupations ((NS-SEC) class 7) = poorer people. The extremes between these two social cohorts may be as much as 4 years. People in class 7 occupations on average may die at age 81 and presumably some even earlier! (These differences in LE are mirrored by Geographic postcode variations derived from local socio-economic factors.)

More recently, the State of Ageing 2023 report² from the Centre for Ageing Better, notes that, while there are wealthy older people, wealth inequality within older age groups is vastly greater than between older and younger age groups and there are large numbers of older people living financially precarious lives. In fact, relative poverty rates for over 65’s in the UK stand at nearly 18% or 2.1 million people;

Moreover, subsequent ONS reports³ show that if anything this disparity has worsened. A 2022 ONS report, which to some extent reflect the impact of COVID, shows that between 2018 to 2020, males living in the most deprived areas were living 9.7 years fewer than males living in the least deprived areas, with the gap at 7.9 years for females; both sexes have seen statistically significant increases in the inequality in life expectancy at birth since 2017. Although the Adviser has to also consider just how much of that extended lifespan will be spent in good health – Healthy Life Expectancy. For sure significant co-morbidities, vulnerabilities, loss of independence and care needs may well cast a cloud over an individual’s very later years and indeed become a significant drain on financial resources.

None of this is new, for twenty years ago, in his book The Status Syndrome,⁴ Michael Marmot first drew people’s attention to the fact that the lower the social status, the higher risk of illness and death, and consequently the shorter the life expectancy. In recent years, he has written extensively on the subject and also, under the imprimatur of Live long and prosper?, The Resolution Foundation has also drawn attention to the socio economically rooted disparities in life expectancy across the UK.

So, the general principle outlined by Nigel in his talk holds true, namely that predicting a client’s Life expectancy by using averages by age may lead to a considerable underestimation of their actual lifespan – If requested, I suspect Pension and Annuity providers would have much more accurate figures of their own to hand, which they may be prepared to share?

At least higher net worth individuals, can access, for example through SOLLA members, good quality financial advice. However, thinking more widely, and continuing to put the wider consumer interest first, plenty of less well-off folk, with potentially shorter lifespans, make important financial decisions without any guidance at all. Beyond Bank accounts, credit cards and various insurances, the majority of  those people will have had little contact with financial services and may well, apart from any potential housing wealth, have little pension or other assets. Therefore they won’t require full-on paid for financial advice, but, nevertheless, in a civilised society one would have hoped, beyond charities and the CAB, there would be somewhere they can be signposted to, possibly by Advisers, for guidance as to how to achieve better financial outcomes in later life for them and their families?

Peter Barnett
Advisory Board Chair, SOLLA

¹ Trend in life expectancy at birth and at age 65 by socio-economic position based on the National Statistics Socio-economic Classification, England and Wales - Office for National Statistics 2015
https://www.ons.gov.uk/peoplepopulationandcommunity/birthsdeathsandmarriages/lifeexpectancies/bulletins/trendinlifeexpectancyatbirthandatage65bysocioeconomicpositionbasedonthenationalstatisticssocioeconomicclassificationenglandandwales/2015-10-21

² The State of Ageing 2023. Centre for ageing better March 2024
https://ageing-better.org.uk/summary-state-ageing-2023-4

³ Health state life expectancies by national deprivation deciles, England: 2018 to 2020. ONS. April 2022
https://www.ons.gov.uk/peoplepopulationandcommunity/healthandsocialcare/healthinequalities/bulletins/healthstatelifeexpectanciesbyindexofmultipledeprivationimd/2018to2020

⁴ The Status Syndrome, Michael Marmot. 2004. London: Bloomsbury and Significance, Volume 1, Issue 4, December 2004, Pages 150–154
https://doi.org/10.1111/j.1740-9713.2004.00058.x