Keoghs Insight

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Mike Renshaw

Mike Renshaw

Partner

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Ogden 8: change in life expectancy predictions  

Blogs19/02/2020

The ONS published updated mortality data in December 2019. This showed a significant reduction from life expectancy predictions between 2008 and 2016. The new data generally predicts lower life expectancy than the 2008 data which was relied on for Ogden 7. 

The forthcoming 8th edition of the Ogden tables will use the 2018 mortality data, therefore life multipliers for males and females will reduce as a result. 

By adopting the 2018 data and 2020 mortality projections we have calculated what we anticipate the new Ogden 8 life multipliers to be. We will not know the exact multipliers until they are published by GAD in February/March 2020 but we expect them to be very close to the figures calculated. 

To illustrate the impact of this we have prepared some illustrations here.  We have used annual loss figures of 125k and 250k per year for comparative purposes. There is a reduction to male life multipliers of about 1.5. Female life multipliers go down by about 2.6. Earnings multipliers don’t change very much.

The saving by using the new data is dramatic and across the whole book will be material.

We will update the Keoghs extracted multiplier tables as soon as we see the official GAD tables due next month. We will also provide bespoke Ogden multiplier calculators to those clients that have this service.

The immediate implications of this shift in mortality projections are:

  1. It is imperative that handlers use m/ers reflective of the new mortality data.
  2. It is probably in our interests not to use fixed terms for life m/ers but to use m/ers based on an adjusted age when calculating life m/ers
  3. On a practical point mortality adjustment of fixed term m/ers are often overlooked but costly if this happens.  
  4. Will this data shunt more claimants to prefer lump sum awards? We doubt this very much at minus 0.25% ODR and probable investment returns even on a cautious fund.

A further update will follow on publication of the tables by the GAD. For further information contact any member of our Ogden Discount Rate Team: Matt Perkins, Ken Young, Sam Ramen, Andy Underwood and Mike Renshaw.