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Retirement

New longevity calculator for clearer outcomes

longevity calculator

A pension provider has created a new longevity calculator using statistics and health data to provide a clearer view on retiree lifespans.

A new lifespan calculator, which combines government collected longevity statistics with health data from a global reinsurer, has been released by a pension provider to create personalised life expectancies for individuals.

The calculator has been developed by Optimum Pensions, based on Australian Bureau of Statistics Life Tables, and incorporates data from Hannover Re to produce an an individual’s life expectancy that can be personalised using health and lifestyle factors.

The tool can include both spouses in a couple and allows users to focus on their level of confidence regarding whether their retirement planning will be sufficient to cover their potential lifespans.

Optimum Pensions head of innovation Jim Hennington said research into the methodologies used in some retirement planning tools offered by superannuation funds and financial advisers were not always best practice when determining life expectancy.

This was also seen in outdated life expectancy statistics being quoted in the media, he added, with the Actuaries Institute raising concerns that longevity tables used by financial planners to build retirement income models were out of date and do not take into consideration longer life expectancy figures.

According to Hennington the combination of the ABS statistics and the health data “can add 10 years to the results that a less accurate life expectancy calculator provides”.

“It is a must-have for more accurate retirement planning,” he said.

Optimum Pensions stated the Lifespan Calculator was available for hosting on any organisation’s website and encouraged financial advisers to re-examine the longevity models they used.

“Optimum Pensions calls on all retirement professionals to check that the life expectancy calculation methods they use are fit for purpose,” Hennington said.

“If the lens we view retirement through is inaccurate then incorrect conclusions will be drawn about retirement strategies and decisions. Retirees should not be paying the price.

“With Australians living longer, it is more important than ever to understand how long retirement income needs to last. Underestimating a retiree’s lifespan could mean they outlive their savings. Overestimating it could mean an excessively frugal existence for the retiree,” he concluded.

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