Showing posts with label Aging. Show all posts
Showing posts with label Aging. Show all posts

Oct 17, 2009

Actuarial Sustainability Alarm

Recently the European Commission launched the 'Sustainability Report 2009", investigating the long-term (2010-2060)sustainability of public finances.

This report clearly shows the long-term economic effects of the aging society and the continuous increasing life expectancy.

Financing increasing pension and health costs in the next decades, will be a real challenge for almost all European countries. Even more, the current financial crisis and unsure financial outlook urge for severe short term measures in order to prevent much more unpleasant other measures in the next decades.

The report claims that the ability to meet public pensions liabilities is a higher long-term risk for governments than ever before and in most cases reform of member states’ pensions systems is 'must' and can no longer be delayed.

Although the report manly focuses on the increase (the so called delta) of the sustainability gap, I would like to take a look at the development of the aging costs in relation to the debt development of each country.

Development Aging costs
Let's start to take a look at the development of the public pensions liabilities (pension costs) and health costs from a slightly different angle as published in the report:

On average the total aging costs are increasing from 25% in 2010 to about 30% in 2060 on bases of a no-policy-change assumption.But there a countries (BE, EL, LU, SI) that grow way above this average to a level that's even above the current level of countries with high social standards, like Sweden and Finland.

To conquer this development, some member countries are trying to tackling the longevity issue by raising retirement ages.
Not only the pension costs increase, but also the projected long-term increase in healthcare spending is large and constitutes on its own a risk to sustainability.

Countries whose regimes are listed by the report as 'high-risk' in terms of sustainability are: The Czech Republic, Cyprus, Ireland, Greece Spain, Latvia, Lithuania, Malta, the Netherlands, Romania, Slovakia and the UK. In many countries the age-related expenditure is expected to climb quickly against existing financial imbalances.

Development gross debt ratio
As is clear from the next table, the mentioned next decades increase in health and pension costs, in combination with the unhealthy financial situation - due to the credit crisis - cumulates in a clear desperate debt situation for most of the European countries:

The table shows the government gross debt ratio in 2008 and 2009, and the projections for 2010, 2030 and 2060, once the costs of servicing debt and paying for age-related expenditure are taken into account.

As mentioned before, the long-term debt projections have been prepared under a no-policy-change assumption and in partial equilibrium. Given these assumptions, the projections are not robust forecasts and are not meant to be realistic scenarios of what may happen in the future.

The aim of the debt projections is to illustrate the long-term trends and the size of the required remedial action to avoid government debts to enter into an exponentially increasing spiral.

Actuary Involvement
It's clear that the debt and social costs developments are not heading in the right direction..... Actuary involvement to analyze, advice and create new social systems seems necessary.
Actuaries on the bridge, please!

- EC
- Sustainability Report 2009
- Report 2009
- Download: Maggid Excel tables Aging Costs and Debt Development

Jan 24, 2009

Longevity escape velocity

Aubrey de Grey, a British biomedical gerontologist, states in his book "Ending Aging," that that the fundamental knowledge to develop effective anti-aging medicine mostly already exists.

In a Ted Show presentation he states:

Why should we cure aging?

Because it kills people!

Age damage
There are seven types of aging damage :

Damage rising with age Proposed as contributing to aging by
Cell loss, cell atrophy Brody (1955) or earlier
Extracellular junk
Alzheimer (1907)
Extracellular crosslinks Monnier and Cerami (1981)
Cell senescence Hayflick (1965)
Mitochondrial mutations Harman (1972)
Lysosomal junk Strehler (1959) or earlier
Nuclear [epi]mutations (cancer) Szilard (1959) and Cutler (1982)

Although, for more than 25 years, science suspiciously didn't seem to develop, all kind of medicines to repair these damages are already within reach for mice.

Age damage for human beings is strongly age related:

As the chairman of the Methuselah-Foundation, De Grey stimulates scientists to develop medicines that repair age damage for this living generation.

Experiments on mouses showed that medicines didn't only slow down the aging process, but could reverse it as well (condition: start in time!). It turns out that every time a new medicine is developed and applied, it restores - above a certain threshold of reserve capacity - the lost reserve capacity for about 50%.

This would imply that if new medicines for human beings would be developed within the next decade and the rate of developing new medicines will be fast enough to stay 'ahead of the game', all people of 50 years and younger would be able to live a thousand years or more and people just slightly older could still live for hundred years or more.

In 2006 Technology Review announced a $20,000 prize for any molecular biologist who could demonstrate that De Grey was wrong. Nobody succeeded!

If De Grey is right, actuaries don't even have to start calculating new life expectancies or other (financial) consequences. Life insurance and pension will have to be redefined.
Even stronger: We'll have to redefine our life!

Sources: Ted Show presentation, Pres. 1, Pres 2

Related links:
A model of aging as accumulated damage matches observed mortality ...

Oct 24, 2008

Demographic Winter

Are we heading for a demographic winter?

Worldwide, birth rates have declined by more than 50% in the past 40 years.

In most of the industrialized world, birth rates are well below replacement level.

Main issue: The decline of the human family.

View the trailer or the complete movie 'Demographic Winter'.

Sep 28, 2008

Ageing and the Sustainability of Dutch Public Finances

In a 2006 (but still actual) research called, "Ageing and the Sustainability of Dutch Public Finances", it's stated that the ageing of the population jeopardises the sustainability of public finances in the Netherlands.

The doubling of the ratio between the number of retirees and the number of workers destroys the balance between future public expenditure and tax revenues. Indeed, the increase in expenditure on public pensions and health and long-term care will outweigh the increase in tax revenues.

Budgetary reforms are therefore necessary in order to avoid that future generations will have to raise taxes or economize on public expenditure.

Reforms in the field of social security of the last few years are a step in the right direction, but are insufficient. In particular, the decline of interest rates and the reduced wealth of pension funds have worsened the sustainability of public finances. The effects of reforms on the intergenerational balance are important for the question which further reforms are most attractive.