Life Actuary of the Year Joseph Lu explains the importance of accurately estimating life expectancy
Life Actuary of the Year Joseph Lu explains the importance of accurately estimating life expectancy
It's important people make informed decisions when buying annuities to convert pension fund savings into an income for life. Whilst research suggests an increasing awareness of the right to shop around and that they could be offered extra income based on their health issues, awareness of how long they're likely to live still appears to be lacking.
Over the last 50 years, the average life span of women in the UK has increased by 8 years and by 10 years for men. Recent research by the Institute of Fiscal Studies found that both men and women tend to underestimate how long they're likely to live and as Joseph Lu, Mortality Risk Actuary for Legal General explains, this makes planning for retirement more difficult.
"UK average life expectancy figures published last year suggest men buying annuities at age 65 are now likely to be paid an income for 20 years, whilst women could reasonably expect an income for a further 24 years. Being aware of this helps people to be more prepared for their retirement by saving more and reviewing when to give up work.
Providers of annuities have traditionally used average life expectancy to help decide how much they can offer people based on their buying amount and how long their income is likely to be paid. The yearly amount offered to customers has tended to fall over the years as income payments are typically having to stretch over a longer period of time."
Joseph added; "Whilst actuaries like myself still monitor average life expectancy trends, we prefer to base our estimations and income offers on individual circumstances. Sharing information about health risks and medical conditions could enable some providers like Legal & General to offer extra income, so it's important to shop around before buying.
ENDS
Note to readers and editors
This article is intended for consumers.
Contacts:
Legal General Annuities
Timothy Gosden
01737 375 289
timothy.gosden@landg.com
