Pension schemes are being urged to factor in the rising longevity of affluent men to their assumptions, as the group has seen its life expectancy rise faster than any other national trend over the last five years.

Research by the Pensions and Lifetime Savings Association and Club Vita suggests that this trend could have significant implications for defined benefit pension schemes as typically over half of their liabilities will be in this ‘comfortable’ group.

The report shows that between 2011 and 2015 men in the ‘comfortable’ group (£7,500+ retirement income a year) continued to see rapid rises in longevity, gaining 17 weeks of life expectancy. This maintained the trend of steadily increasing longevity from the previous 10 years.

In contrast, for men in the ‘making-do’ group (modest incomes) and ‘hard pressed’ group (living in deprived areas with low levels of retirement income), life expectancy has remained unchanged since 2011. For women, life expectancy has increased a little since 2011 increasing by four weeks for the ‘making-do/comfortable’ group and nine weeks for the ‘hard-pressed’ group.

Commenting, PLSA director of external affairs Graham Vidler said: “This is an important piece of research for UK DB pension schemes as it highlights that ‘one size does not fit all’ and that using standard actuarial projections may lead to misleading funding assumptions. Clearly, a scheme with a high proportion of more affluent members might need to make more provision than a scheme with a more mixed demographic.

“Pension scheme trustees and managers have to take a view on the outlook for longevity many decades in the future. This report is designed to help with better decision making and scheme management. It will enable schemes to react to recent trends in a way that is appropriate to their circumstances and will provide a more nuanced evidence base than general data or generic data models.”

In addition, Club Vita head of research Steven Baxter said it has never been more important for pension schemes to have an insight into socio-economic dynamics of longevity trends.

“Trustees of DB schemes are faced with tough decisions to make. Standard actuarial projections have shown a slowdown in rising life expectancy and some have even questioned whether DB schemes should be funding for future, uncertain, increases in longevity. However, our evidence that life expectancy is still rising at the same pace amongst affluent males is highly significant.”

“For the majority of DB pension schemes the liabilities are concentrated amongst the more affluent men. This group appear to have been resilient to the events of recent years. It is vital that schemes recognise this to ensure they are using appropriate longevity assumptions. Gone is the day of ‘one size fits all’ for longevity projections.”

Commenting on the reasons for the divergence, Baxter added: “While the nation has seen a slow-down in rising life expectancy over recent years our analysis has shown that men in ‘comfortable’ socio economic groups are, in contrast, maintaining a consistently rising life-expectancy. There has been a divergence in longevity expectations between these groups and the lower socio-economic ‘making do’ and ‘hard pressed’ groups, with the longevity improving twice as fast for the ‘comfortable’ group. At a societal level it is concerning to see a halt in the narrowing of the longevity gap amongst different parts of society that we had seen previously.

“It is impossible to say definitively what is causing this disparity. It could be due to one off events such as the flu vaccine failing to provide protection against a particular flu strain, or an especially harsh winter. It could also be the impact of austerity measures making life a bit harder for those who don’t have as easy access to support networks, or alternative resources to buffer them from changes in the social care system. In reality it will be caused by a combination of all of these types of elements. What is certain, though, is that the ‘comfortable’ group are proving to be more resilient.”

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