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Longevity risk: The key questions answered – FT Adviser

September 13th, 2020 2:52 am

National life expectancy data is not a suitable tool for retirement planning, an expert has warned.

Joseph Lu, director of longevity science at Legal & General Retail Retirement Income, made the warning at this week's FTAdviser webinar The Long and Short of Longevity Risk.

He said: National life expectancy data is not suitable for planning as it implies there is a one in twochance of outliving the figure.

"It doesnt account for health, wealth and other important factors.

If we would like a 90 per cent chanceof achieving life-long financial security, for age 65, plan for living to 100. This means planning for 35 years."

But he added: "It is not just the length of life that matters. I would also want to think about health which in turn determines needs in retirement.

Mr Lu highlighted recent research by the Pensions and Lifetime Savings Association, which showed that a couple would need almost 29,100 each year to achieve a moderate retirement, but 47,500 for a comfortable retirement.

His sentiments were echoed by Bruce Guthrie, professor of general practice at the University of Edinburgh, who said although statistics can help, they are not a guarantee.

He said: Prediction tools can help focus a clinicians mind and focus a patients mind, but these tools should not be certainty.

During the webinar, advisers heard how statistical models can be built into the client's planning process but that these should be part of an overall conversation with the individual, as there are many behavioural and personal biases around longevity and mortality that will need to be factored into pension planning.

Jon Scannell,distribution director for Legal & General Retail Retirement Income, noted that it is useful to pay attention to a variety of factors. He told listeners there were 'four Ls' that could prove a good starting-point for conversations around making the pension pot last.

These are: "Legacy, Liquidity, Lifestyle and Longevity". The challenge is for advisers to be able to balance client expectations for retirement with the facts around lifestyle, health, mortality and the various other risks that can have an effect on a pension pot.

The webinar, which was sponsored by L&G and is available online for a month, also discussed the impact of talking to clients about life expectancy, and how advisers can de-risk their business.

aamina.zafar@ft.com

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Longevity risk: The key questions answered - FT Adviser

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