In this article, we delve into these insights and explore the implications for pension funds navigating the intricate landscape of longevity risk assessment.

The unique angle brought by considering council tax bands adds depth to our understanding of the intricate relationship between financial well-being and life expectancy. It has long been attested that affluence has a strong influence on both morbidity and mortality of individuals. This exploration indicates that council tax bands capture some of these effects. Individuals who are registered as dying in residential properties with higher tax bands tend to achieve older age brackets more frequently than their counterparts in lower bands, prompting contemplation and quantification of the multifaceted factors influencing our journey through time.

While conventional models often focus on geographic factors down to the ward level, the council tax approach, which can be offered at a postcode sector level, offers a more discriminating view. This departure from the norm provides access to the localized dynamics that contribute to variations in life expectancy, providing a richer context for understanding the nuanced impact of affluence on longevity.

As an example, the table above presents a comprehensive breakdown of cumulative probabilities of death based on both age bands and council tax bands in the city of Manchester. Similar tables can be constructed for a variety of different geographies that can then be straightforwardly imported into existing longevity models structures.

Age Bands (Column A)
The table categorizes individuals into age bands of 5 years each, allowing for a detailed examination of mortality rates across different life stages.

Mortality Rates by Council Tax Bands (Columns B-F)
Columns B through F break down the cumulative percentage of total deaths for each age band based on the council tax band of the residence.

e.g. Column B represents council tax band A (the least affluent) and Column F for council tax bands E and above (the most affluent).

Odds Ratio (Column H-I)
Column H provides the odds ratio for individuals in a specific age band living in a property with council tax band A compared to those in council tax bands E and above.

For example, the odds ratio for the age band 60-64 years is 379. This suggests that individuals in this age group residing in a residential property with council tax band A have significantly higher odds of mortality compared to those in the same age group living in residential properties with council tax bands E and above. Almost 4 times more likely in this case.

In summary, this cumulative probability Table highlights the interplay between age and affluence as indicated by different council tax bands. It allows readers to discern patterns and make informed amendments of mortality risks across various demographic segments.
The extended use of data that discriminates lifestyles that impact upon longevity, enables: 

  1. More robust assessment of longevity risk. 
  2. Increased accuracy of fund valuations.
  3. Estimation of bespoke risks on lower value funds.
  4. Reduced reliance on default risk premiums.

For pension funds navigating the terrain of longevity risk during valuation, these findings offer a valuable lens through which to assess and manage risk.

While the statistics used within this piece are of the Manchester area only MM have a complete view across the UK, which can be a key variable in helping to improve longevity calculations.

Please contact MM. for more information on how you can assess and use this information