Lifespan Data Suggest Pension Crisis in U.K. Could Be Overstated
By MARK COBLEY
Harry Patch, one of Britain’s last surviving World War I veterans, likes to tell people that he is “nothing special.” But, at 110 years old, Mr. Patch is a remarkable outlier in terms of life expectancy — and a reminder why the pension crisis in the U.K. might not be as dire as it seems.
Many people inside and outside the financial world assume that rising longevity will bankrupt the world’s pensions systems. In response, U.K. companies have cut back on private-sector retirement entitlements — since 2000, nearly 4,800 private-sector pension plans have been closed on average annually, according to a U.K. advocacy group, the Taxpayers’ Alliance.
Reuters: Most retirees won’t live as long as Britain’s Harry Patch.There was more evidence of pensions in crisis last week, when U.K. telecom provider BT Group secured agreements with its trade unions on cutbacks to its £34.4 billion ($50.9 billion) plan. Other companies such as Royal Dutch Shell are making similar moves. Rising life expectancy is one of the factors they cite.
The plunging value of investment portfolios this year is compounding the worries. The U.K. government’s Pension Protection Fund, which tracks 7,800 private-sector funds that together have pension liabilities of £814 billion, said last week that in the past year an aggregate surplus of £84 billion has slumped to a deficit of £97 billion.
That sounds grim, but other data paint a different picture. The Actuarial Profession, a U.K. trade organization, says companies could be overstating retirement bills by up to £30 billion, thanks to excessively cautious predictions of how long people will live. For individual companies, that might amount to up to 10% of liabilities, according to PricewaterhouseCoopers.
Longevity is tricky to pin down. But if companies report the size of their future pension bills as a real debt on today’s balance sheets, as accounting standards require, they must make their best estimate.
The estimates vary tremendously. Pension consultancy Hewitt, for example, has uncovered a gap of nearly 10 years in forecasts of the life expectancy of a 40-year-old man between the U.K. and the Netherlands.
Another headache is that most actuarial tables are based on data drawn from insurance companies. But life-insurance policyholders tend to be more affluent than the average, and the affluent tend to live longer. Using pension-plan data since 2003, the actuaries group concluded that pensioners, on average, live 21 years beyond their 65th birthday, while insurance policyholders can expect a 22-year retirement.
That extra year adds up to £30 billion, says Pricewaterhouse, which recommends companies assess their plans individually, rather than adopting generic industry longevity data.
It isn’t easy to hear, but not everyone is going to live as long as Harry Patch.
Write to Mark Cobley at [email protected]
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Royal Dutch Shell conspired directly with Hitler, financed the Nazi Party, was anti-Semitic and sold out its own Dutch Jewish employees to the Nazis. Shell had a close relationship with the Nazis during and after the reign of Sir Henri Deterding, an ardent Nazi, and the founder and decades long leader of the Royal Dutch Shell Group. His burial ceremony, which had all the trappings of a state funeral, was held at his private estate in Mecklenburg, Germany. The spectacle (photographs below) included a funeral procession led by a horse drawn funeral hearse with senior Nazis officials and senior Royal Dutch Shell directors in attendance, Nazi salutes at the graveside, swastika banners on display and wreaths and personal tributes from Adolf Hitler and Reichsmarschall, Hermann Goring. Deterding was an honored associate and supporter of Hitler and a personal friend of Goring.
Deterding was the guest of Hitler during a four day summit meeting at Berchtesgaden. Sir Henri and Hitler both had ambitions on Russian oil fields. Only an honored personal guest would be rewarded with a private four day meeting at Hitler’s mountain top retreat.
IN JULY 2007, MR BILL CAMPBELL (ABOVE, A RETIRED GROUP AUDITOR OF SHELL INTERNATIONAL SENT AN EMAIL TO EVERY UK MP AND MEMBER OF THE HOUSE OF LORDS: 
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