Serious underestimations of future life expectancy by actuaries are one of the main causes of the pension crisis, claims Pensions Commission chairman Adair Turner.
Speaking to an ABI fringe meeting at the Labour Party conference ahead of publication of the commission's report on October 12, Turner attributed part of the pension problem to the industry relying on inaccurate life expectancy predictions.
In 1981, the Government Actuaries Department estimated that, by 2004, 65-year-olds would have an average life expectancy of 14.8 years while latest figures show that life expectancy at 65 has actually increased to 19 years.
Turner said the figures show that life expectancy after 65 is increasing by one year every five years.
He told the meeting: “Actuaries have underestimated substantial changes that have occurred. This has huge implications for public pensions.
“We are assuming longevity that is a third less. Anybody running a private defined-benefit pension plan was getting it wrong by 30 per cent.”
ABI director general Mary Francis has already said she believes the commission will recommend that the Government adopts compulsory pensions in the workplace.