When we first met three years ago, she was living with dementia and had some very clear goals.
As we sat chatting and drinking tea in the kitchen of her North London home, it became clear that moving into a residential care home was not an option. This was despite a growing need for quite intensive personal care, delivered successfully to date by a small number of trusted round-the-clock carers provided by a reliable care agency.
Working with her attorney, I presented a range of options, eventually settling on an affordable care plan which would allow her to stay in her own home for the rest of her life, with carers on hand as her needs became more intensive.
Only a couple of months ago, this advice seemed on track to be financially positive; the amount spent on an immediate care annuity was getting close to being repaid in full through benefits, before moving into ‘profit’ territory. In fact, her family were convinced she would live for at least another five years. Sadly an infection which proved impossible to clear up resulted in her premature death at the weekend.
As Financial Planners, we’re all used to our clients dying. Advising on the financial consequences of death, and helping family to administer the associated paperwork, is something we’re all called on to manage from time-to-time.
Something else which is an integral part of our role as Financial Planners is understanding longevity. Life expectancy forms a core part of the lifetime cash flow forecasting process. We pick what we believe to be a reasonable date of death and our forecasting tells us whether or not the client is likely to have run out of money by that time.
As a rule of thumb, we select age 100 for this purpose. It’s significantly higher than the current average longevity, but of course average includes a wide range of outcomes. With improving life expectancy, we perhaps aren’t too far off age 100 becoming the norm, rather than the exception.
Clients will often hold strong views on this subject too. I’ve met a number of clients convinced they will shuffle off this mortal coil at a relatively young age, and plenty who tell me they will keep going forever.
Often these strongly held opinions about our own mortality are driven by family history; within my own family, on my mother’s side, we’ve celebrated two 100th birthdays - my great grandmother during the late 1980s and, just last month, my great aunt reached that milestone too.
In the news recently was the latest official figures from the ONS showing a statistically significant slowdown in the long-term improvement in age-standardised mortality rates for England and Wales, which took place around the early 2010s. It’s worth reading the article - snappily called ‘Changing trends in mortality in England and Wales: 1990 to 2017 (Experimental Statistics)’ - to better understand some of the issues at stake.
Whether this slowdown to long-term improvement in mortality rates is a short-term blip due to the flu virus and spells of unseasonably cold weather, or represents the start of a longer term trend, is yet to be seen. There are fairly convincing arguments both ways.
But data like this combined with predictions about exponential improvements to medical technology, resulting in a dramatic boost to life expectancy, should give us all pause for thought and prompt a review of the assumptions we currently use.
Martin Bamford FPFS Chartered Financial Planner SOLLA Accredited Later Life Adviser
Managing Director, Informed Choice