The tables used by advisers to estimate retirees’ longevity and calculate how to make their savings last are in need of a critical update otherwise retirees will be at risk of outliving their money, urges the Actuaries Institute.
The call has come after the government has recently commenced a review into retirement income.
For Actuaries Institute president Nicolette Rubinsztein, it is clear the tools now available to calculate retirement income may not follow best practice when it comes to increasing life expectancy.
In 1970, the average age of death for women in retirement was just over 80. In 2010, this had increased to 87, which is what the current point of reference tables are using.
But financial service providers need to consider how much life expectancies will increase between now and the time someone retiring today reaches their 80s or 90s, the institute said.
It believes a well-educated woman entering retirement today, with an affluent career and good quality housing, is just as likely to live beyond age 100 as she is to die before age 80.
To have more than a coin-toss chance, the institute has defined the probability for a person’s lifespan needs to have 80 per cent or more certainty.
And clients who live to different ages were said to need different advice and strategic investments.
"Life expectancy calculations are often required in the superannuation and financial planning industries," Ms Rubinsztein said.
"They have a material impact on the way retirement income and products are evaluated."
Factors that were noted to affect longevity included medical research, living standards, nutrition and lifestyle, education, occupation, genetics and wealth.
Several firms have been impacted by the corporate regulator’s action.
Super funds must now have a retirement income strategy in place.
Vanguard has called for a complete overhaul of the advice industry.
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