News Life and Health17 Dec 2018

Australia:Mortality rates affect voluntary buying of retirement products

| 17 Dec 2018

People who know they will live longer are more likely to acquire annuities, according to a study by actuaries who calculated mortality rates among Australians who use annuities.

The study suggests that allowance be made for future improvements in mortality rates when it comes to pricing comprehensive income products for retirement.

The Actuaries Institute and Rice Warner used UK mortality data on annuitants to calculate similar rates for the Australian population, in research funded by David Orford, an actuary and managing director of Optimum Pensions. They hope the research will help develop retirement income products.

The Institute has released a report titled “Exploring Retiree Mortality” and, based on the study, said, "Typically, those who choose to invest in pooled retirement income products have longer life expectancies (lower mortality rates) because those in poor health do not purchase a product that could see them lose their capital on death."

"Longevity can also impact perceptions of value-for-money as longer life expectancies increase the price (reduce the return) of the products. This will be a particular issue for women who have longer life expectancies than men."

The researchers found a shortage of Australian data covering retirement income products because of a historic focus on products such as account-based pensions, where there is no longevity protection. The data have limitations and are indicative only and can't be relied upon pricing or valuation of retirement income products, the paper says.



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Recent Comments

Ian Ferres

Given different mortality tables were used 60 years ago for Aust life policies and annuities sold by Life Office - this not a really surprising conclusionconclusion

17 December 2018

Alun Stevens (author)

No Ian, it isn't surprising. And it wasn't really a conclusion of the work either. Just a feature. The issue was the extent of the selection which was rather deeper than I recollect when we used to price these at NM. The voluntary purchasers were as good at underwriting themselves as life offices doing medicals.

17 December 2018

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