Differential mortality (by income)
The gap in mortality between social, income, or education groups: it means annuity buyers outlive the general population, so an average table understates their longevity.
A national mortality table blends populations whose longevity differs widely by income, education, or occupation. Yet people who buy an annuity or have a supplementary pension are, on average, better off and therefore live longer: applying the general table to their portfolio would understate the liability. Insurers correct for the gap with experience tables, adjustments by category, or, in the UK, enhanced annuities for people in poor health or with low incomes. The phenomenon also raises a fairness question: a pension system with a single retirement age shifts resources from short-lived groups to long-lived ones. Measuring the gap and how it drifts is thus both a pricing issue and a social policy issue.
In February 2018, INSEE, the French statistics agency, reported that over 2012 to 2016 male life expectancy at birth reached 84.4 years among the richest 5% (average living standard of 5,800 euros a month) against 71.7 years among the poorest 5% (470 euros a month), a gap of 13 years; for women, the gap was 8 years. At the same education level, life expectancy still rose with living standards.
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