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What is Normal?Email Marketing Business Opportunity - Helen BairstowUnexpected Consequences of SegmentationThe Easiest way to do a Client NewsletterWhy Warren Buffett won't buy a NewspaperNew Longevity Index
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New Longevity Index

Click here to buy - A How To Book of SMSF's by Tony Negline
Tony Negline

Last week the Treasurer formally launched the Australian Institute of Population Ageing Research which is associated with the University of NSW.

This new Institute has produced the first edition of its Longevity Index which is "designed to quantify changes in the costs and risks of longevity as current life table survival probabilities, year-on-year inflation rates and long term interest rates vary".

The source for the life tables will be the annual ABS life tables not the quinquennial Government Actuary life tables published after each Census. (The 2005/07 Australian Life Tables are expected sometime before the end of this year.)

"The index shows the relative costs of providing a unit indexed income stream to an individual to the age at which they will be 95 per cent confident, based on the most recent ABS life tables, of covering their longevity risk," says the information provided with the first index. It also uses the Government 10 year bond rate.

The first index shows the probable survival of 65 year olds. Around 50% of males can expect to live to age 84 and 50% of females beyond age 88. The AIPAR paper says that this data is provided to " highlight the longevity risk faced by individuals without longevity insurance."

Unfortunately this data is not disaggregated between singles and couples. Perhaps this might be provided after further research.

The term "longevity insurance" is not explained.

I have mentioned a number of times that one good reform of the Costello "Better Super" changes was the ability to retain money in the super system indefinitely. It surprises me that no one has developed a savings plan that assists younger Australians to save for their older age care and health needs throughout their working lives.

Thus far the super industry has been focused on "retirement income" and not the major costs of retirement.

At the launch the Treasurer also mentioned the forthcoming Intergenerational Report which is technically not due until 2012 (they are required every five years and the last was released in 2007) but we can expect to see the next one released before May 2010.

The Government now thinks our population will increase more strongly than previously thought and that we will not age as rapidly. However the number of people over 65 will still grow to 22% of the population in 2049 compared to 13% now.

In 2007 it was thought that a quarter of the population would be over 65 by 2049.

The improvement comes about because of expected higher fertility and immigration.

This crystal ball gazing is very important because it enables the savings cultural landscape to be painted.

However as Lester Wills has been writing about for quite some time, the simple truth is that we will still need older workers staying in the workforce for much longer.

Some researchers and academics are begining to think that the 20th century invention of the universal right to a permanent holiday in the 'younger' old ages is beginning to unravel and possibly even disappear. But as T.S. Elliot once wrote, "most people can't stand too much reality."

You can view a copy of the Longevity Index here: http://www.atcbiz.com.au/r.php?r=zw8ezj5


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