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Comment: IFAs should not be complacent over life expectancy

While the rate of life expectancy increases has slowed, the population of over-80 year-olds is getting larger and advice for this group will become more important than ever

Comment: IFAs should not be complacent over life expectancy

One of my longstanding and favourite memories of financial services advertising is the Pearl Assurance ‘five ages of man’ campaign. It warned of the dangers of not insuring for your old age.

The advertisement showed the ageing features of a man, who at 25 was smiling and saying: ‘They tell me this job is not pensionable.’ 10 years later he says: ‘Unfortunately my work does not carry a pension.’

As lines start to appear on his forehead at 45 he sighs: ‘How I wish I could look forward to a pension.’ By 55 his hair is receding and he looks worried, observing: ‘I dread reaching retiring age without a pension.’

Finally at 65, looking very old, almost bald and very tired he says in despair: ‘Without a pension I really don’t know what I shall do!’

I must have seen this advertisement for the first time on a billboard nearly 50 years ago. It had a profound effect on me. It prompted me to speculate: ‘Am I really going to look like that at 65?’ and ask: ‘What happens after age 65?’ It is probably one of the reasons why, 50 years on, the effect of increasing longevity continues to fascinate me.

Looking at longevity

Around eight years ago, with the assistance of a leading actuarial practice, I attempted to monetise my fascination with longevity.

I created a longevity calculator as part of an online development aimed at ‘providing simple tools and educational content for the over 50s to manage their health, wealth and wellbeing as longevity increases. That work led to investigating all sorts of interesting areas, including conducting an online survey via a social networking site.

Unfortunately we could not raise the backing to progress the development but it was hugely educational. 90% of those surveyed said they had considered their financial futures, but only 35% had undertaken a financial projection or plan. Only 13% were confident they would have enough money for their retirement.

Interestingly two-thirds of respondents claimed to have considered their own longevity but fewer than one in 10 correctly estimated the expected lifespan of a newborn child.

The need for education was very clear. Not just around the effect of longevity but importantly morbidity, particularly for the elderly.

We had designs on building a model that would show not only life expectancy but impaired life expectancy and unhealthy life expectancy. That proved somewhat problematic as the data for the unhealthy life expectancy was especially hard to come by.

No doubt over the past eight years the quality of data will have improved and we are now starting to see the emergence of planning tools that address this important aspect.

I believe we will see a lot more development in this area. For example, it is important for couples that any calculations and risk assessments should cover both individuals. This will ensure the full exposure to risks of impairment and disease are taken into account for both partners as that can materially influence the financial consequences and demands.

Advice opportunity

There is a danger that recently published Office for National Statistics data, which showed improvements in life expectancy had stalled during 2015-2017, may lead to complacency. That would be a mistake. Education on the value of ‘healthier’ ageing and progressing the understanding of the effect of ‘unhealthy’ ageing remains vital.

Importantly the population of over-80 year-olds will continue to increase and advice and planning for this group will become even more important. Advisers should look to take advantage of the new tools as they become available.

If that Pearl advertising campaign was rerun today, it would need a new look with new faces for a 75 and an 85 year-old. And maybe even a 95 year-old.

John Moret is principal of MoretoSIPPS

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