Magnitude of the Longevity Issue

Joseph Lu

The population of many industrialised countries, such as the UK, is ageing and living longer. These trends affect the economy, healthcare and provisions for retirement. However, we still have much to learn about the drivers of human longevity and there remains much uncertainty about the future trends of longevity in populations.

This chapter provides an overview of the key sources of longevity risk and the pension schemes and types of insurance products containing longevity risk. In addition, we consider the size of the longevity opportunity or issue and provide our thoughts on how longevity risk may be managed and mitigated going forward. Several of the themes covered in this chapter will be covered in greater detail later in this book.

Financial impact of longevity

Demographic trends in many countries are unambiguous. People in developed countries are having fewer children and are living longer, leading to a rise in the average age within the population, ie, an ageing population. In the Organisation for Economic Co-operation and Development (OECD) countries, for every 1,000 aged 20–64 there were 195 aged 65 and above in 1975. The equivalent figure for age 65 and above

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