Britons die later than they expect, save too little

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Britons think they will die five years earlier on average than official forecasts predict, raising questions over whether people are saving enough for old age, a survey showed on Monday.

A poll of nearly 4,000 people showed Britons significantly underestimate how many years they will live, even when they enter their 60s, the report by the Nottingham University Business School (NUBS) said.

Those surveyed on average said they expected to live just over the age of 79 years, while forecasts from the Government Actuary’s Department (GAD) estimated citizens will live almost until 85.

Rising longevity has added to strains on public and private retirement systems in Britain and other countries, pushing pension reform up the political agenda.

If individuals’ expectations of how long they could live catch up with official forecasts, it could boost their saving habits, Christopher O’Brien, director for risk and insurance studies at NUBS, told reporters. “A better understanding of how long people could live could have a dramatic effect on the level of voluntary pension takeup,” he said.

If people are more realistic about how long they are likely to live, it may encourage a rise in voluntary pension saving by about 50 percent, based on projections of saving habits.

GENDER GAP

The gap in women’s perceptions of their own mortality is even larger. Women think they will make it to just over 80 years against an official forecast of more than 86 years.

Men’s view of their life expectancy is closer to reality. There is a gap of about four years between their average response of 78 years compared with an official forecast of over 83.

“Even in their 60s, when people are most likely to buy annuities, men underestimate their longevity by around three years and women by over 4.5 years,” the survey said.

But smokers are too optimistic. On average they estimate they will live about three years less than non-smokers. However, mortality evidence suggests the gulf is probably twice as wide at six years.

The actuarial profession in Britain has come under fire recently for making over-optimistic assumptions about investment returns and underestimating lengthening lifespans. This has contributed to big shortfalls in pension provision and cuts in bonuses and dividends.

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