The ageing population

Government statistics are projecting that by the year 2020 there will be 12% more people in the UK aged 65 and over than there were in 2015. This compares with an overall population growth of just 3%.

Another prediction is that the number of retired people will have increased by 1.1 million in the three years after 2015, making this the fastest growing sector of the population.

Meanwhile we have become accustomed to the assumption that improvements in medical science will result in ever-increasing lifespans, with consequent pressure on family finances.

However, this assumption has been cast into doubt by research undertaken by the actuarial profession (actuaries are the number-crunchers who are said to have found accountancy too exciting).

Figures produced by the Continuous Mortality Investigation of the Institute and Faculty of Actuaries suggest that for a number of reasons lifespans may not be increasing as fast as had been thought.

What are the messages of these various statistics for retirees wondering how long their finances will last? Very often, the answer will depend on the type of pension scheme to which they belong.

Members of occupational pension schemes have the great benefit of certainty as to the income they can expect to receive. The investment risk in funding undefined periods of retirement falls on the employer, and many occupational schemes are suffering from massive financial deficits.

The employers who fund these schemes are offering what appear to be extremely attractive terms to employees who transfer to personal schemes, in which the investors bear the investment risk.

However, personal schemes enjoy the benefit of much greater flexibility as to the times at which and the ways in which benefits can be drawn.

Comparing the benefits of the two types of scheme is a complicated exercise and requires specialist professional advice.

The twin dilemma facing many personal pension holders is how long they will live and how long their funds will last. In this respect the actuaries’ conclusions may give rise to mixed feelings

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The ageing population

Government statistics are projecting that by the year 2020 there will be 12% more people in the UK aged 65 and over than there were in 2015. This compares with an overall population growth of just 3%.

Another prediction is that the number of retired people will have increased by 1.1 million in the three years after 2015, making this the fastest growing sector of the population.

Meanwhile we have become accustomed to the assumption that improvements in medical science will result in ever-increasing lifespans, with consequent pressure on family finances.

However, this assumption has been cast into doubt by research undertaken by the actuarial profession (actuaries are the number-crunchers who are said to have found accountancy too exciting).

Figures produced by the Continuous Mortality Investigation of the Institute and Faculty of Actuaries suggest that for a number of reasons lifespans may not be increasing as fast as had been thought.

What are the messages of these various statistics for retirees wondering how long their finances will last? Very often, the answer will depend on the type of pension scheme to which they belong.

Members of occupational pension schemes have the great benefit of certainty as to the income they can expect to receive. The investment risk in funding undefined periods of retirement falls on the employer, and many occupational schemes are suffering from massive financial deficits.

The employers who fund these schemes are offering what appear to be extremely attractive terms to employees who transfer to personal schemes, in which the investors bear the investment risk.

However, personal schemes enjoy the benefit of much greater flexibility as to the times at which and the ways in which benefits can be drawn.

Comparing the benefits of the two types of scheme is a complicated exercise and requires specialist professional advice.

The twin dilemma facing many personal pension holders is how long they will live and how long their funds will last. In this respect the actuaries’ conclusions may give rise to mixed feelings