Public sector pensioners don’t necessarily live longer than private sector ones, a new study by Club Vita Canada Inc. has found.
In its inaugural longevity study, the analytics provider and Eckler Ltd. subsidiary found that male private sector pensioners are actually living slightly longer than those in the public sector. It warned that by focusing on the type of plan they have, plan sponsors may be more likely to incorrectly measure the life expectancy of their members.
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Instead, plan sponsors should look at individual attributes such as where a pensioner lives, noted Richard Brown, senior longevity consultant at Club Vita Canada. “Our approach allows pension plans to unlock insights into how long plan members are living. We have found that for a male pensioner age 65, we can explain a nine-year difference in life expectancy based on individual attributes like postal code, which helps to identify a pensioner’s lifestyle and socio-economic status.”
Other factors that can better predict longevity include gender; whether a pensioner had a disability during retirement; whether the beneficiary is the original plan member or a surviving spouse; the pensioner’s salary at retirement; and whether the pensioner worked a blue-collar or white-collar job, according to the study.
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Brown noted some Canadian insurance companies are already using postal codes to predict longevity, and that in Britain, the pension industry has adopted the method.
“By adopting a similar approach as insurers and reinsurers, pension plans looking to transfer risk can much better assess the benefits and costs of transferring longevity risk. And by gaining better insight into how long pensioners are living today, plans can shift their attention to how life expectancies may change in the future, as it’s this future uncertainty that plans should be really focused on,” said Brown.