High-profile advisory group for new Australian institute on population ageing research
The Federal Treasurer, Wayne Swan MP, today launched the nation’s first Longevity Index at the opening of the Australian Institute for Population Ageing Research (AIPAR) at the University of New South Wales. AIPAR, an initiative of the Australian School of Business, brings together research from across UNSW on population ageing, harnessing expertise from the fields of business, social sciences, engineering, medicine and the built environment.
Mr Swan said: “The AIPAR Longevity Index is an important contribution to those seeking to understand the changing costs facing those who wish to fund their retirements. These costs are affected by changing interest rates, inflation and, of course, longevity.”
Mr Swan announced membership of the AIPAR Leaders Forum, which will assist AIPAR to formulate its research agenda, build links with stakeholders and raise its profile and standing.
“I am pleased to announce the members of the AIPAR Leaders Forum: Marc de Cure (Chair); Professor John Piggott (Director AIPAR); Dr Jennifer Alexander (Royal Australasian College of Physicians); Cameron Clyne (National Australia Bank); Craig Dunn (AMP); Professor Les Field (UNSW); Dr Jeff Harmer (FaHCSIA); Dr Ken Henry (Federal Treasury); Mark Johnson (PricewaterhouseCoopers Australia); Matthew Quinn (Stockland); Heather Ridout (Australian Industry Group); George Savvides (Medibank Private); Professor Peter Shergold (Centre for Social Impact) and Glenn Stevens (Reserve Bank of Australia),” said Mr Swan.
AIPAR Director, Professor John Piggott said: “Population ageing is one of the most crucial issues facing the world today. The proportion of retired people is increasing relative to younger people in the workforce, and the potential economic and social impacts are profound. Savings and investment patterns will change. The sustainability of pension schemes will be challenged. Labour markets and trade patterns will be reconfigured, and health care needs will increase.
“The proportion of Australians aged 65 and over is projected to almost double to a quarter of the population by 2050. Critically, while there are now five Australians of working age to support every person aged 65 and over - by 2050 it is forecast that there will only be 2.4 people in that crucial support role.
“AIPAR is researching the challenges raised by population ageing, developing ideas for new products and formulating policy proposals. AIPAR will work in partnership with industry and government, including its two founding sponsors – The Australian Prudential Regulatory Authority and PricewaterhouseCoopers Australia. It will work closely with the public, private and not-for-profit sectors as well as national and international research institutes,” said Professor Piggott.
Australian Institute for Population Ageing Research (AIPAR)
- The Australian Institute for Population Ageing Research (AIPAR), brings together cross disciplinary research at UNSW on one of the most crucial issues facing the world today – population ageing. AIPAR will work closely with national and international research institutes and the public and private sectors.
- According to the United Nations Population Division, during the next four decades the number of people in the world aged 60 or over is likely to almost triple, rising from 672 million in 2005 to about 1.9 billion by 2050.
- On present trends, according to the Federal Government’s 2007 Intergenerational Report, the proportion of Australians aged 65 and over is projected to almost double to a quarter of the population by 2047.
AIPAR Longevity Index
- The AIPAR Longevity Index shows the capital cost at each age to buy an income of $1 per annum in real terms to death.
- The AIPAR Longevity Index changes quarterly to reflect changes in longevity, interest rates and inflation.
- The AIPAR Longevity Index reflects the 10 year Government Bond rate and the annualised inflation rate at the end of each quarter.
- The AIPAR Longevity Index shows, for example, that the cost of purchasing an annuity to provide an income of $50,000 per annum (real) at age 65 in December 2006 would cost an individual approximately $1.1 million (before insurer charges). In June 2009, it would have cost approximately $1 million, reflecting changes in interest rates and inflation over that time.
- The AIPAR Longevity Index was developed by Professor Michael Sherris and Professor John Evans from Actuarial Studies at the Australian School of Business, UNSW.
AIPAR Affiliated Research Centres
Aging Research Centre, Prince of Wales Hospital
Scientific Director, Professor G A (Tony) Broe
Ph: 9382 4259
Email: firstname.lastname@example.org or email@example.com
Website:Aging Research Centre, Prince of Wales Hospital
City Futures Research Centre, UNSW Faculty of the Built Environment
Professor Bill Randolph
Ph: 9385 5117
Website: City Futures Research Centre
Social Policy Research Centre, UNSW Faculty of Arts and Social Sciences
Professor Ilan Katz
Ph: 9385 7810 or 93857800
Website: Social Policy Research Centre
School of Electrical Engineering and Telecommunications, UNSW Faculty of Engineering
Professor Branko Celler
Ph: 9385 6546
Website: School of Electrical Engineering and Telecommunications
Asia Pacific Ubiquitous Healthcare Research Centre, Australian School of Business, UNSW
Associate Professor Pradeep Ray
Website: Asia Pacific Ubiquitous Healthcare Research Centre
School of Actuarial Studies, Australian School of Business, UNSW
Associate Professor John Evans
Ph: 9385 8790
Website: School of Actuarial Studies
Centre for Pensions and Superannuation, UNSW
Associate Professor Hazel Bateman
Ph: 9385 3096
Website: Centre for Pensions and Superannuation
AIPAR Research Projects
AIPAR has a number of research projects underway at the Australian School of Business:
Research Project 1:Working Longer
AIPAR has underway a research project on preparing for a longer working life. Living longer is what we all want to do. But to live longer, and finance it, you have to work longer, too. A major research project being undertaken by AIPAR Director, Professor John Piggott and a team of researchers is trying to come up with ways to make this easier. Comprising economists, an occupational health and safety (OH&S) specialist, a demographer and an epidemiologist, the project takes a serious multi-disciplinary approach to the question.
“To see why, consider a simple example – the idea of transition to retirement,” says Professor Piggott. “To an economist this makes a lot of sense. But if you come at it from an OH&S angle, we’d say there’s a lot of evidence showing that when people cease full-time work and go casual, they find it very stressful. They don’t know that they’re going to have a job next week. For an older person, this may have serious health implications. This isn’t something traditional economics imports into its thinking.”
Several UNSW economists affiliated with AIPAR have current major research projects on this issue. Professor Alan Woodland leads a team building OLG models to investigate economy-wide impacts on labour supply. And Associate Professor Garry Barrett leads two ARC funded projects – one on economic determinants of labour supply among older Australians, as well as a project on the related issue of retirement saving.
“What we would like to do eventually is get an evidence base that will enable us to recommend policy initiatives which might encourage people to stay in the labour force for longer, without undue social stress,” Professor Piggott says. “The research is Australian based but the project as a whole has international ramifications.”
Research Project 2: Measuring Longevity
Current techniques for measuring longevity in the future are inadequate. Professor Michael Sherris, Head of Actuarial Studies at the Australian School of Business, is developing new models to meet the needs of the financial and regulation community. It has not been uncommon for experts in the field of ageing, from insurance organisations and government, to underestimate the population’s longevity as drugs and medical treatments improve.
New Modelling Techniques
Professor Sherris is heading up a major research project to develop a new
population modelling system that will not only provide greater accuracy in the near future, but which will allow for variations, trends and volatility within various sectors of the aged community.
“Those in the modelling area have looked at the longevity issue and built it into financial products, but the modelling has not been as good as it could have been,” Professor Sherris says. “For example, a lot of pension funds that provide benefits and life insurance companies that offer annuities are finding their assumptions way off the mark and are left with a substantial cost.”
The first step taken by Professor Sherris and his colleagues has been to analyse current modelling processes, taking them apart and attempting to build better systems that capture variability.
These new models will allow the financial industry to develop products that work for customers whilst understanding and managing the risk behind those products. The research begins with an analysis of data from the “Human Mortality Database” which holds statistics, collected internationally, on deaths according to age and sex.
Professor Sherris and his team then develop their own research results on mortality statistics in other categories, such as various socioeconomic groups and amongst those who have or have not purchased life insurance or annuities. “We’re not just looking at population but also at the characteristics of people who are likely to have these products,” he says. “That’s something we have to understand better.”
After coming up with new modelling processes, the project will investigate product issues and regulation issues to help avoid the equivalent of the credit crisis in the mortality field. “The ultimate outcome is having a better understanding of what’s driving the risk in terms of longevity,” Professor Sherris concludes. “We need to understand what sorts of products are going to be best in terms of handling that and what sort of regulatory framework would be best to allow those products to be offered and the obligations met.”