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We're living longer, and this is a problem for pensions and the NHS.
The longer we live, the longer our pensions have to support us, and the
more money will have to be spent on keeping us healthy.
According to data from JP Morgan's LifeMetrics,
the life expectancy of a British 65-year-old has increased by
approximately two years over the ten year period from 1996 to 2006.
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Female
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Male
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Life expectancy at age 65, in 1996
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82.86
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79.41
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Life expectancy at age 65, in 2006
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84.54
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81.78
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Predicting
how these life expectancy figures develop in future is arguably the
biggest challenge in the pensions industry. Estimates vary as to the
cost, but for each additional year of average life-span, something of
the order of £15bn to £40bn must be added to the pension pot to support
it -- annuities cost more if you live longer.
A recent chat about these figures inevitably led to the question: “How can we make money from this trend?”
Along with the obvious investment candidates such as pharmaceutical
companies and healthcare providers, a more direct suggestion was a
straightforward bet on reaching the age of 100.
The first such
bet to pay out in UK was in 1994, the bet having been place eleven
years earlier at odds of 100-1. That's over 50% per annum compound! And
if an 89 year old woman could get odds of 100-1, surely the odds
against a 40 year old man reaching that iconic age must be huge?
Salivating, and with dollar signs in my eyes, I decided to check it out. Paddy Power (LSE: PAP) wouldn't quote a price for it, but William Hill (LSE: WMH) immediately responded with odds of 60-1. How disappointing! That works out at only 7.1% annually if you win -- similar to what you could expect from the stock market, but with your money tied up for sixty unpredictable years.
I
guess the bookies are getting fed up of people living to be 100. And
besides, these are novelty bets, placed as much for their entertainment
value as for financial return. But I think perhaps I've gleaned as much
entertainment value as I can from this already, so will stick to more
traditional forms of investing.
The Motley Fool doesn't do gambling, but we're Seriously Good with Money -- why not check out our investing hub page?
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