Steve Webb’s idea of providing people with a life expectancy
calculator received mixed reviews. I happen to think it’s a good starting
point. People really do underestimate how long they are going to live. Even if
we are given tables of average figures, most of us automatically deduct at
least a couple of years (for bad behaviour!).
MGM Advantage recently did a survey which found men thought
they were going to die at 81, where the average is 86. And women thought they
were going to die at 79, and the average was 89. So, it’s obvious most of us
need a sharp prod to get a more realistic idea of how long our money has to
last.
But until we get that sci-fi DNA code generator that can
work out our exact date of death, we are talking about averages and statistics
here. So we need to emphasise the possibilities of living longer than the average. We should
be giving people the statistical possibility of them living to 90 or 100.
These risks need to be drawn out. If you are aware you have a 15% chance of
something happening you may adjust your behaviour and choose to cover/address
that risk.
But this cannot be a one-off prediction issued to people
only when they ‘retire’. Firstly, because the longer you live, the longer you
are predicted to live. So, my predicted life expectancy would be greater at 75
than it would be at 60.
And secondly because things will change. Medical factors will
change. Lifestyles will change. (For example a decade ago the Government began
pushing companies to reduce the salt in processed foods with the result we ate 15%
less salt in 2011 than in 2003.) Even the way we predict life expectancies will
change.
So, the conclusion has to be people need to regularly
receive life expectancy predictions.
In fact, life expectancy predictions should be for life, not
just for retirement.
And that leads us onto how we deliver the original
prediction and any subsequent updates. Steve Webb’s idea is life expectancy
predictions should be delivered as part of the guidance guarantee. Sure, we can
leave people with a calculator to revise the expectancy whenever they want. But
will people really do that, and if they do, will they, as a consequence, take any different or new
action?
So following this train of thought the guidance, shouldn’t be
a one off event either. And when you think about it, it’s inconceivable that it
would work that way. The days of people making a single (irreversible) decision
at retirement are long behind us. People will need regular and consistent help
to make sure their money lasts for their lifetime. However long that may be.
