Category: Retirement

Interpreting Pandemic-Related Decreases in Life Expectancy

Mary Pat Campbell

Link:https://www.actuary.org/node/14837

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Excerpt:

Period life expectancy measures demonstrate fluctuations that reflect events that influenced mortality in this particular period.14 For example, the Spanish flu pandemic of 1918 resulted in a dramatic decrease in period life expectancy, which was more than offset by an increase in period life expectancy the next year. A male baby born in 1917 had a period life expectancy of 52.2 years, while a male baby born in 1918 had a period life expectancy of only 45.3 years—a reduction of almost 7 years.15 The following year, a male newborn had a period life expectancy of 54.2, an increase of almost 9 years over the period life expectancy calculated in 1918 for a newborn male. These changes are much larger than those seen thus far with COVID-19, demonstrating the relative severity of that earlier pandemic relative to the current one.

It is instructive to review the impact of calculating life expectancies on a cohort basis, rather than a period basis, for these three cohorts of male newborns in the late 1910s. Using mortality rates published by the SSA for years after 1917, for a cohort of 1917 male newborns, the average life span was 59.4; for the 1918 cohort, average life span was 60.0; and for 1919, it was 61.5. Even these differences are heavily influenced by the fact that the 1917 and 1918 cohorts had to survive the high rates of death during 1918, while the 1919 cohort did not.

If both period and cohort life expectancy are measured as of 1920 for each of these groups (the 3-year-old children who were born in 1917, 2-year-old children who were born in 1918 and 1-year-old children who were born in 1919), differences are observed in these measures as they narrow substantially because the high rates of mortality during 1918 have no effect on those who survived to 1920. This is summarized in the table below.

Author(s): Pension Committee

Publication Date: December 2021

Publication Site: American Academy of Actuaries

Clarifying Misunderstanding of Life Expectancy and COVID-19

Mary Pat Campbell

Link:https://www.actuary.org/sites/default/files/2022-02/EELifeExpectancy.pdf

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Excerpt:

Basically, there are two life expectancy measures—
period life expectancy and cohort life expectancy.
Period life expectancy generally is based on the
assumption that current rates of death continue
indefinitely. Cohort life expectancy is more heavily
influenced by long-term expectations. Period life
expectancies can vary dramatically from one year to the
next when there is a short-term increase in mortality.

….

Period life expectancy can be a
useful metric for year-over-year
comparisons in normal times but
tends to exaggerate the effect of
nonrecurring events. Cohort life
expectancy is likely what most people
envision when thinking about the
concept of life expectancy because
cohort life expectancy is an estimate
of the actual number of years
that a typical individual might be
expected to live based on reasonable
expectations for future conditions.
For this reason, cohort life expectancy
is the measure used by the Actuaries
Longevity Illustrator that can help
individuals estimate how long they
might live.

Publication Date: Feb 2022

Publication Site: American Academy of Actuaries

Who Cares About Life Expectancy?

Mary Pat Campbell

Link:https://contingencies.org/who-cares-about-life-expectancy/

Excerpt:

Life expectancy at birth (LEB) in the U.S. has grown about 50% since 1900, with most of the increase going to upper income groups. (See “Differences in Life Expectancy by Income Level”; Contingencies;July/August 2016.)Depending on the data source and the methodology used to determine it, LEB in the U.S. is about 77 and 82 for males and females, respectively.

I’m a retiree, so I’m more interested in life expectancy at age 65 (LE65). (OK, fine, life expectancy at a somewhat higher age is more pertinent for me, but LE65 is the more common measurement.) LE65 in America is about 18.2 and 20.8 for males and females, again depending on the dataset and methodology.

LEB and LE65 in America are calculated from a dataset of 330 million lives. Another dataset of 7.5 billion lives provides a LEB of 68 and 72 for males and females, a significant difference from the LEB mentioned earlier. The 7.5-billion-life dataset was the world population rather than the U.S. population subset. A meaningful LEB requires homogeneity of the underlying dataset.

Author(s): Bob Rietz

Publication Date: Jan/Feb 2022

Publication Site: Contingencies

Boomers Who Left Jobs During Pandemic Aren’t Claiming Social Security: Study

Mary Pat Campbell

Link:https://www.thinkadvisor.com/2021/12/30/boomers-who-left-jobs-during-pandemic-arent-claiming-social-security-study/

Excerpt:

The research showed that the rate at which older workers left employment increased dramatically during the pandemic. 

This was especially the case with women — an 8-percentage-point increase vs. 7 points for men; Asian Americans — a 13-point increase; those with less than a college degree — a 10-point increase; and workers with occupations that did not lend themselves to remote work.

….

There was one exception: Workers 70 and older were 5.9 percentage points more likely to leave the workforce and retire. The study noted that these workers were likely already receiving Social Security benefits, so claiming did not markedly increase.

Among all workers 55 and older, the monthly claiming rate for Social Security benefits remained constant between April 2019 and June 2021, the researchers found.

Author(s): Michael S. Fischer

Publication Date: 30 Dec 2021

Publication Site: Think Advisor

DC Plans Use Pension Features to Improve Retirement Outcomes

Mary Pat Campbell

Link:https://www.plansponsor.com/in-depth/dc-plans-use-pension-features-improve-retirement-outcomes/

Excerpt:

To help participants grow their balances, employer-sponsored DC plans are also incorporating behavioral finance concepts into plan design and architecture by automating systems.

“Now we see automatic enrollment, we see target dates, we see managed accounts that are becoming more complex and having more options as baked into defined contribution plans,” says Deb Dupont, assistant vice president for retirement plans research at the LIMRA Secure Retirement Institute. “All of these things make it much easier and in fact [a] more passive decision on the part of the participant.”

Legislation, including 2019’s Setting Up Every Community for Retirement Act, has also eased plan sponsors’ responsibilities when selecting an insurer to offer annuitization options for participants’ decumulation stage. The safe harbor has prompted sponsors to increasingly build lifetime income options into their plans to provide retirement income certainty. And prior to the SECURE Act, the Pension Protection Act of 2006 led to widespread adoption of qualified default investment alternatives, including target-date funds, which helped DC plans incorporate ideas from DB plans, Dupont adds.   

Author(s): Noah Zuss

Publication Date: 9 Feb 2022

Publication Site: Plansponsor

Increase in UK state pension age to 68 could come eight years early

Mary Pat Campbell

Link:https://www.theguardian.com/money/2021/dec/15/increase-uk-state-pension-age-68-could-come-eight-years-early-review

Excerpt:

Millions of people born in the 1970s may have to wait longer to collect their UK state pensions if a government review, which was announced this week, recommends bringing forward plans for a retirement age of 68.

The state pension age rose to 66 last year, with two further rises planned, meaning that by 2046 those born on or after April 1977 would need to wait until 68 before they can draw the benefit.

However, the review will look at bringing forward that change by eight years, so that the increase is phased in between 2037 and 2039.

Author(s): Hilary Osborne

Publication Date: 15 Dec 2021

Publication Site: The Guardian

Battle lines drawn over the future of UK’s biggest pension fund

Mary Pat Campbell

Link:https://www.theguardian.com/business/2022/feb/05/battle-lines-drawn-over-the-future-of-uks-biggest-pension-fund

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Excerpt:

The UK’s biggest private pension scheme, the Universities Superannuation Scheme (USS), was no different: the custodian of the retirement savings of 470,000 university and college workers lost billions of pounds.

At its latest valuation, actuaries came up with an alarming conclusion: the assets of USS were only worth £67bn, leaving a huge deficit of £18bn compared to the liabilities it has promised to pay out in the future.

Yet the recovery was almost as extraordinary as the decline. Central banks pumped money into the economy, and tech companies in the US recorded astonishing gains. That helped USS assets back to more than £90bn at the end of January.

That recovery – and the controversial question of how the fund accounts for it – has put USS at the centre of a row that could result in university staff occupying picket lines across the country. The scheme will also be at the centre of a legal battle this month, with academics asking a court for permission to sue directors for not performing their duties.

….

 In a paper published in September, David Miles, professor of economics at Imperial College London and a former Bank of England monetary policymaker, and James Sefton, also an Imperial economics professor, argued that the risk of USS having insufficient funds to pay promised pensions was between 20% and 40%.

Simon Pilcher, chief executive of USS Investment Management, is in charge of choosing the actual investments. “Sadly, one can’t project the past into the future,” he said.

“Today, we think it is reasonable to expect lower returns going forward than we’ve experienced in the past, because it’s those higher returns that have driven us to these high prices.”

Author(s): Jasper Jolly

Publication Date: 5 Feb 2022

Publication Site: The Guardian

Income Sources of Older Households: 2017

Mary Pat Campbell

Link:https://www.census.gov/library/publications/2022/demo/p70br-177.html?utm_medium=email&utm_source=govdelivery

PDF: https://www.census.gov/content/dam/Census/library/publications/2022/demo/p70br-177.pdf

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Excerpt:

This report examines older households’ sources of income, the amounts of this income, and how much each source of income contributes to total income. Older households receive income from a variety of sources, including social programs, private retirement savings, and earnings. Estimates from the 2018 Survey of Income and Program Participation (SIPP) show that in 2017, lower-income households relied on Social Security to a large degree, while higher-income households received a larger share of their income from private retirement savings and earnings. 

Author(s): DANIEL THOMPSON AND MICHAEL D. KING

Publication Date: Feb 2022

Publication Site: U.S. Census

AstraZeneca to End Its US Corporate Pension Plan

Mary Pat Campbell

Link:https://www.ai-cio.com/news/astrazeneca-to-end-its-us-corporate-pension-plan/

Excerpt:

AstraZeneca, a British–Swedish biopharmaceutical company responsible for developing one of the world’s most widely distributed COVID-19 vaccines, announced on January 25 that it will be transferring its pension assets to an insurance company.

“This is a common practice, achieved via a process known as ‘plan termination’ and ‘buy-out.’ This action does not impact any participant’s eligibility to receive the benefit earned under the pension plan,” AstraZeneca representatives wrote in a statement explaining the transition.

AstraZeneca’s US pension initially began struggling with its funded status in 2017, and the company made the decision to freeze benefit accruals that year. This move ended up making a significant difference, bringing funded status from 80% in 2017 up to 99.19% by the end of 2018. The plan currently has $1.3 billion in assets under management (AUM) and serves approximately 7,000 employees, according to its Form 5500.

Author(s): Anna Gordon

Publication Date: 7 Feb 2022

Publication Site: ai-CIO

State pension system is unsustainable, says Heather Humphreys

Mary Pat Campbell

Link:https://www.irishtimes.com/news/politics/state-pension-system-is-unsustainable-says-heather-humphreys-1.4792791

Excerpt:

The State pension system is “not sustainable” and there is “no getting away from that fact”, Minister for Social Protection Heather Humphreys has said.

Ms Humphreys also said there are “no easy options” when it comes to reforming the State pension.

The Oireachtas Joint Committee on Social Protection, Community and Rural Development and the Islands said in its report, published on Wednesday, that the State pension age should not rise beyond the age of 66.

Its view runs counter to the stance of the Pensions Commission which argued the pension age should rise in steps to 67 by 2031 and then to 68 by 2039.

….

“Today we have 4.5 people working for every one pensioner, by 2050 we will have two people working for every pensioner,” Ms Humpreys said.

Author(s): Sarah Burns

Publication Date: 3 Feb 2022

Publication Site: Irish Times

How Much Is ‘Enough’?

Mary Pat Campbell

Link:https://www.asppa-net.org/news/how-much-%E2%80%98enough%E2%80%99

Excerpt:

Looks like those hoping for some clarity on a threshold issue involving ERISA fee litigation will have to wait for another day.

I’m referring, of course, to last week’s ruling by the Supreme Court on the case of Hughes v. Northwestern University et al.—a case that the law firm of Schlichter Bogard & Denton—which seems to have “invented” this class of excessive fee litigation—said was having a “chilling effect” on this type of lawsuit, more precisely their ability to proceed to trial (or settlement). Consequently, ERISA fiduciaries were waiting anxiously for a ruling on the case, which involved allegations that Northwestern University had failed to comply with its fiduciary responsibilities with regard to the options available to plan participants. 

Indeed, the allegations in this case weren’t all that different from the litany transgressions outlined in any number of such cases over the years—but in making their case to be heard by the nation’s highest court the plaintiffs’ attorneys (the aforementioned law firm)—had noted (complained?) that suits “with virtually identical” claims were being dismissed out of hand, while other courts were allowing them to go to trial. This they claimed was “…not a factual disagreement about whether the specific allegations at issue clear the pleading hurdle,” but rather “a legal disagreement about where that hurdle should be set.” 

….

Consequently. some clarity as to how, and how much, must be established by those who file the suits before they get to take the issue(s) to trial is timely, to say the least. Or, said another way, how much is “enough.” 

….

Rather, the court had merely determined that there were some prudent alternatives on the menu, and that the participants could choose them if they had an issue with those that (allegedly) weren’t as expensive and that, for that district court, was enough.

Author(s): Nevin E Adams, JD

Publication Date: 3 Feb 2022

Publication Site: ASPPA

Veterans Voice: For ‘service and sacrifice.’ Vets call pension tax exemption long overdue

Mary Pat Campbell

Link:https://www.providencejournal.com/story/news/local/2022/02/07/ri-veterans-pension-tax-exemption-long-overdue/6664797001/

Excerpt:

In 1998, Reform Party candidate Victor Moffitt campaigned for state treasurer on a platform that included eliminating the state income tax on military pensions. 

Said Moffitt in 1998: “That’s a small amount to pay to the people who risked their lives to preserve our freedom and democracy.”

This history frustrates Vasquez-Hellner because Rhode Island is one of only four states that does not have a specific exemption for veteran pensions. (The first $15,000 of all pensions, regardless of source, are tax-exempt.)

….

Supporters argue the change is a long-overdue step to counter the impression that Rhode Island does not treat its veterans as well as other states, such as Massachusetts and Connecticut. Both fully exempt veteran pensions from state income tax.

Author(s): Frank Lennon

Publication Date: 7 Feb 2022

Publication Site: Providence Journal