Mortality of Public Sector Pensioners Anne Wilson & Richard Boyfield

Transcription

1 Mortality of Public Sector Pensioners Anne Wilson & Richard Boyfield Mercer This presentation has been prepared for the Actuaries Institute 2014 Financial Services Forum. The Institute Council wishes it to be understood that opinions put forward herein are not necessarily those of the Institute and the Council is not responsible for those opinions.

2 Commonwealth and State Unfunded Liabilities 30 June 2013 AASB 119 Basis ($billion) Commonwealth (net of Future Fund) New South Wales 44.5 Victoria 28.9 South Australia 11.9 Western Australia 7.0 Tasmania 5.0 Northern Territory 3.5 ACT 2.5 Queensland 25.9 Total of unfunded liabilities Sources: Budget papers, Consolidated Financial Statements, Annual Reports. 2

3 Estimated total Public Sector Pension Liability All Australian Public Sector Pensioners Total pension over $8.5 billion pa Liability for current pensions alone in excess of $150 billion (on 30 June 2013 AASB 119 basis ) 3

4 Australian Public Sector Pensioner Database Data provided for onwards; Comprehensive checks; continuous reconciliation; Pensioner data inherently reliable; 3 months lag before data collected; 4.4 million years of total experience; 800,000 years of experience Total exposure is $24 billion annual pension payments 4

5 : experience vs population % of Australian population mortality 160% 140% 120% 100% 80% 60% 40% Males UNDER 61 Females 0509 result 0509 result OVER 90 Retiree pensioners 20% Age Range 5

6 180% 160% Male retiree pensioners % of Australian population mortality 140% 120% 100% 80% 60% 40% All groups combined State group A State group B State group C State group D State group E State group F State group G 20% Age Range 6

7 350% % of Australian population mortality 300% 250% 200% 150% 100% 50% Spouse pensioners Males Females 0% Age Range 7

8 400% % of Aust pop mortality 350% 300% 250% 200% 150% 100% under 3 years over 3 years 50% 0% age range 8

9 350% 300% % of Australian population mortality 250% 200% 150% 100% Males Females 50% 0% Age Range Invalidity pensioners 9

10 Comparisons: socio-economic effect 140% Male retiree pensioners % of Australian population mortality 120% 100% 80% 60% Lives Pension amounts 40% Age Range 10

11 140% % of Australian population mortality 120% 100% 80% 60% Lives Pension amounts Female retiree pensioners 40% Age Range 11

12 Comparison with Mercer % 140% % of Mercer 0509 mortality 120% 100% UNDER 61 Male Retirees Female Retirees OVER 90 80% Age Range 12

13 2% Mortality Improvement: Population 1% 0% Age Change in mortality rates ABS to ABS (ages over 55) -1% % pa improvement -2% -3% -4% Males Actual Improvement Rate ALT yr av impr (M) ALT yr av impr (M) Females Actual Improvement Rate -5% -6% ALT yr av impr (F) ALT yr av impr (F) 13

14 Population improvement reduced 2% 1% 0% Age Compare to Change in mortality rates ALT to ALT (ages over 55) % pa improvement -1% -2% -3% -4% -5% Males Actual Improvement Rate ALT yr av impr (M) ALT yr av impr (M) Females Actual Improvement Rate ALT yr av impr (F) ALT yr av impr (F) Males ALT to Females ALT to % 14

15 Mortality Improvement: Pensioners 2% 1% 0% Age Change in mortality rates Mercer 0509 to Mercer 0912 (ages over 55) -1% % pa improvement -2% -3% -4% Males Actual Improvement Rate ALT yr av impr (M) ALT yr av impr (M) Females Actual Improvement Rate -5% -6% ALT yr av impr (F) ALT yr av impr (F) 15

16 Current 65 year old life expectancies (no improvement) ABS ABS % increase Male % Female % Mercer 0509 Mercer 0912 % increase Male % Female % 16

17 Improvements in life expectancies current 65 year old ABS Plus improvement % increase Male % Female % Mercer 0912 Plus improvement % increase Male % Female % 17

18 100,000 Male Survival percentiles Projected Survivors from 100,000 lives aged 65 in ,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 ABS Plus improvement Mercer 0912 Plus improvement Age 18

19 100,000 Female Survival percentiles Projected Survivors from 100,000 lives aged 65in ,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 ABS Plus improvement Mercer 0912 Plus improvement Age 19

20 Significance of mortality: population vs pensioner, with & without improvements 19.6% increase in value $20 $15 $10 $5 Value of $1 pa CPI-indexed pension to current 65 year old male No improvement 25 yr av to 2018, 100 yr ta 25 yr av $0 ABS Mercer

21 Significance of mortality: add a reversion to spouse Value at age 65 of CPI indexed pension of $1pa for life with 2/3 spouse reversion Male No improvement With 25 yr av improvement Increase % ABS $20.63 $22.56 $ % Mercer 0912 $21.74 $23.37 $ % Increase $1.11 $0.80 % 5.4% 3.6% 13.2% 21

22 Significance of mortality: future pension Value to current 45 year old of CPI indexed pension for life from 65 of $1pa (current $) Male No Improvement With 25 yr av Improvement Increase % ABS $12.16 $15.25 $ % Mercer 0912 $13.33 $15.84 $ % Increase $1.17 $0.59 % 9.7% 3.9% 30.3% 22

23 Significance of mortality: Financial effects Hypothetical scheme($2.25bn pension payroll) Total current pension liability under various mortality assumptions Mortality table No Future improvements $bn With improvements assumed $bn ABS Mercer Historic 1988 rates 25.3 Legislated rates (NTC) 31.3 Legislated rates (Family Law) 28.1 UK rates (CMI S2 series)