You have to be very careful how data is presented.
I recently saw a social media thread arguing that because the increase in Covid vaccinations in India was proportionate to the increase in number of Indian infections, vaccinations were spreading the virus.
The truth is that because of the small numbers that have been vaccinated (less than 10% of the population have received a dose of the vaccine) the vaccine has had little effect in stopping the spread of the latest wave of infections.
Here’s another example. A leading political magazine reported that the trade gap with the EU had closed. Exports to the EU were down by 42% down in January. In February they increased by 46.6%% closing the gap. The true maths is that a 42% reduction means that EU exports were running at 58% the previous level.
The 46.6% increase recorded in February has to be applied to the 58%. That increased trade to 85% of pre-January level. This is 15% lower than the pre-January level, still a significant reduction.
In a similar vein, life expectancy is important to later life advisers. Those advising older people need to reassure them they will not outlive their wealth. It’s why we should avoid using averages here.
There are many factors that affect how long an individual will live. Lifestyle, wealth, and DNA all contribute to an individual’s life expectancy. We are familiar with the arguments about what the State pension age should be. The government aim to set it so that it is at the age where one third of adult life remains.
Yet in poorer parts of the country many, on average, will only receive their State pension for a handful of years. In more wealthy parts of the country, on average, the State pension will be received for 20 years or more.
Another area where life expectancy of older people is important is equity release. The rule of 72 is a helpful guide to how quickly the loan will accumulate due to the compounding of the accrued interest. If you divide 72 by the interest rate you can calculate how many years it will be before the original loan doubles. If the interest rate is 4% it will double every 18 years and 3% every 24 years if no capital or interest repayments are made.
With a conservative assumption for house price growth, and average life expectancy, a very reassuring message can be given about the equity that will remain in the home for dependants.
Care, of course, needs to be taken when using average life expectancy. For instance, there are reports that the pandemic will reduce average life expectancy by at least one year. Although it will attract many headlines, it will be meaningless to the later life adviser and their clients.
What the headline will be saying is that those who died in 2020/2021 lived on average a year less than their predecessors. It will not tell us how long those who have survived the pandemic will live. It is these people we need to provide advice to.
Seeing that the virus had the greatest impact on those who were suffering from underlying conditions it is probable those who died had shorter life expectancy than those who survived or avoided the virus. That said it has been calculated that those who died had on average nine to 10 years of life remaining.
It is probable that the average life expectancy of those who have survived the virus has increased rather than reduced. The magic of mortality tables is that the longer you live, the average age at which you will die will increase.
I have already touched upon how average life expectancy varies for those who reach State pension age. Later life advice should focus on risk management. One major risk is living longer than expected. A 65-year old will, on average, live until their mid- 80s. Yet the most common age of death is 89. The risk is living to age 95 or beyond. Almost 10% of 65-year-olds will live to 100 and living beyond 110 is not unknown.
No matter what happens to average life expectancy in the coming months good advice depends upon managing the outlying risks which will not change.
Bob Champion is chairman of the Air Later Life Academy
