The main objective of this paper is to offer a detailed analysis of mortality change in the United Kingdom at the beginning the 21st century. Starting from an exploration of 20th century mortality trends, focusing in particular on the 1990s, underlying forces driving trends in longevity are discussed. These include the ‘cohort effect’ and the ‘ageing of mortality improvement’. International mortality statistics and trends are also analysed. The pace of medical advances is discussed, with specific focus on research into the ageing process and a potential treatment for cardiovascular disease. The paper also discusses the potential threat from infectious diseases.

The analysis of underlying trends suggests that life expectancy in retirement in the U.K. is likely to increase rapidly in the early part of the 21st century. Some scientists are also claiming that we will be seeing the fruits of anti-ageing research within just a few decades.

A core theme of the paper is that future projections should be grounded in as good an understanding of the past as possible. Different methods for projecting future rates of mortality are discussed, and it is noted that emphasis should be placed on the uncertainty surrounding projections.

The financial impact of using different assumptions for future mortality is explored. Significant differences in the cost of an annuity or pension arise from the use of the various projection bases.

Life assurance companies have already declared significant losses as a result of strengthening reserves on annuity portfolios. Taken together, future increases in life expectancy, increasing awareness of the risk of providing longevity insurance, changes in legislation and shortages in market capacity and capital, may well lead to worsening annuity rates.

It is difficult to assess the precise impact of future changes in life expectancy on final salary pension schemes. There is a lack of readily available information on the mortality assumptions being used in practice. It is therefore suggested that more disclosure in this area would be helpful. Employers sponsoring final salary schemes are making promises to their employees that extend up to 70 or 80 years into the future. Actuaries should be clear in spelling out to employers and trustees the nature of the risks behind the promises they are making. Future scheme design should reflect the possibility of substantial increases in life expectancy.

An over-riding implication of the anticipated increases in life expectancy is that people will remain in work for longer in the future. The age at which people retire will inevitably have to increase, and this trend will necessarily drive changes in all aspects of our society. As actuaries we have a vital role in helping to inform the wider debate.

The purpose of the report is to achieve a greater understanding of the United Kingdom ‘cohort effect’ by exploring research in other fields and analysing population mortality data by cause of death in more detail. The ‘cohort effect’ in this context is the observed phenomenon that people born in the U.K. between 1925 and 1945 (centred on the generation born in 1931) have experienced more rapid improvement in mortality than generations born either side of this period.

In a Continuous Mortality Investigation (CMI) Bureau working paper published in 2002, a similar trend was noted in the mortality experience of male pensioners and males with life assurance policies. The CMI Bureau investigation showed peak rates of improvement for the cohort born in 1926. Interim projection bases for future mortality experience were produced as a result of the study. The projections made various assumptions about the extent to which the observed cohort effect would continue to shape the pattern of future mortality improvement.

This report suggests that it is highly likely that the cohort effect has been caused by a number of different factors in combination. Prevalence of smoking from one generation to the next has certainly been one such factor. Furthermore, an analysis of patterns of cigarette smoking suggests that there is a degree of inevitability in some element of likely future improvement, especially for mortality at older ages from conditions strongly linked to smoking.

However, trends in heart disease and breast cancer mortality suggest that smoking is not the only factor. The differences between lung cancer and heart disease trends by year of birth are especially interesting. The report shows that there are two ‘sub-cohorts’ of the 1925 to 1945 cohort: an earlier group where the improvements may be largely due to smoking; and a later one where other factors, such as diet in early life, may have played a greater role.

Historic patterns of smoking behaviour by socio-economic class provide an explanation for the five-year difference in the year of birth showing the fastest improvements, i.e. the difference between 1926 for the CMI Bureau investigation and 1931 for the general population. It is also notable that the second ‘sub-cohort’ of high improvement, applying to people born in the early 1940s, can be seen in both population and CMI experience.

A case study examining Japanese mortality experience shows that strong cohort trends can be projected well into old age. This does not provide proof that the U.K. cohort effect will do the same. However, it does counter arguments that year of birth effects will inevitably wear off with age. It is especially interesting given recent epidemiological research linking early life experience with markers of ageing.

There are a number of reasons to believe that the U.K. cohort effect will have an enduring impact on rates of mortality improvement in future decades. These include historical patterns of smoking behaviour and the impact of early life experience on health in later life. There appears to be little evidence to support the idea that the width of the generation experiencing rapid improvement will reduce with time.