Projecting legacy income and donor numbers to aid financial planning and risk management

At the end of October, the Office for National Statistics released their latest 2018-based population projections with some significant revisions compared to previous predictions. As promised, we have now delved a little deeper into this new data to discover what it all means…

In the latest projections, we see that once again the ONS experts have shortened their assumptions on future life expectancies; and this in turn means a rise in the projected number of deaths. We already saw an increase in projected UK deaths between the 2014-based and 2016-based projections, when total deaths for the 31 year period 2019 – 2050 increased from 21.2m to 22.1m. In the 2018-based projections total deaths are now predicted to reach 22.9m over the same period – that’s a further rise of around 4%.

Looking at the short-term impact, the latest forecasts predict that over the five years to 2024, 3.1 million people will die, compared to 3.0 million projected last time – to be exact, that’s 123,000 more deaths. In legacy terms, this suggests that over the next five years total charitable legacies are likely to be almost 4.1% higher than previously expected – equating to 26,000 more bequests over the five-year period and almost £130m of incremental legacy income per year.

So, what is driving this change in projections? Over the past few decades British life expectancies have been improving, particularly over the period 2000-2010. However, since 2011, life expectancy increases have slowed considerably for both men and women. To put this into context, in the 5 years to 2011, life expectancy at birth increased by 1.6 years in males and 1.3 years in females. In comparison, between 2011 and 2016 this increase slowed to 0.4 and 0.1 years for males and females respectively.

As we can see, although life expectancy is slowing for men and women, the slowdown is worse for women. This means that the longstanding male/female life expectancy gap is narrowing. At the same time, inequality in life expectancy is widening, with the slowdown more accentuated in deprived areas. In the poorest areas female life expectancy has actually fallen since 2011.
The change in projections is linked with certain medical conditions, in particular heart disease and strokes. Up to 2011 we saw mortality rates for both these leading causes of death improve. However, this progress is now diminishing, and that’s having a negative impact on overall life expectancies.

It’s important to remember that although improvements in life expectancies are not as optimistic as previously thought, people will still live longer on average than they do today. Life expectancy for those aged 50 is currently 81.4 for males and 84.3 for females. This compares to 80.9 for males and 84.0 for females back in 2011. By 2050 1.5m people will be aged 90 or over. This may be lower than the 1.8m predicted back in 2016, but it’s still more than double the 600,000 we see today!

The ONS will be releasing data on projected life expectancies by cohort in December, so look out for our next article, when we explore how life expectancies vary by generation and why.

The Office for National Statistics has released its latest 2018-based population projections. The new figures project the UK population to increase by 6 million to 69.4 million by 2043 – this equates to growth of 9%, slower growth than the 15% growth seen in the previous 25 years.

In the 2016-based projections, the ONS experts reduced their assumptions on future life expectancies. In the 2018-based projections, life expectancy increases are lower again. This is due to the continued slowdown in life expectancy growth witnessed over the last two years. Importantly for the legacy sector, this means a rise in the projected number of deaths. During the ten years to 2028, the projections suggest that in the UK 6.4 million people will die, compared to 6.1 million projected last time, an increase of 4%.

We will be digging deeper into this new data over the next few weeks; we’ll share more analysis, including what the changes mean for legacy numbers and income – watch this space.

To stay up to date with all the forecasting news from our team, please click here.

There has been much discussion recently about how deaths have been rising faster than the government actuaries anticipated – this appears to be due to the ‘golden cohort’ (born 1923 to 1935) dying a little earlier than expected – in other words, their life expectancies have not risen as much as initially expected.

That said, people are living longer these days. According to figures just published by the ONS the UK population aged 90 years old and over increased once again in 2018 to 584,000. Within that, the 100 years and over population has now reached 13,170 – the oldest Briton being Dorothy Payne, aged 112 and living in Kent.

Step back 30 years to 1990, and there were just 238,000 90+ year-olds (and less than 5,000 100+ year-olds) – so numbers of the ‘very old’ have more than doubled over the period.

Interestingly, it is men who have driven this rise, thanks in part to lower rates of smoking, leading to dramatic falls in lung cancer and heart disease. Historically it is women who have had longer life expectancies; however, as we have previously discussed, life expectancies for men have been rising faster than those for women – so the gap is narrowing. In 1990, there were over four times as many females aged 90 years plus, but this number has nearly halved over time to just over two times as many females than males.

This all means that more men are now outliving their spouses, and the period of widowhood is becoming shorter. Elderly couples are more able to live at home for longer and care for each other as opposed to the remaining widow or widower needing to enter formal residential care.

So, what does this mean for legacy giving?

The changes we’re seeing could have implications for legacy giving, as typically men are less inclined to leave a charitable bequest in their will. Although at the same time when men do leave a bequest it is more likely to be of a higher value.

There are further questions we need to consider: When a partner dies is there an impact on the legacy choices that were made as a couple? Does the remaining partner continue to respect the joint decisions about charitable gifts in wills, or do they review their choices? Also, how does behaviour differ between men and women?

We are planning some major new research into will making trends and behaviour in the 21st century, which may shed more light on this topic.

Look out for updated analysis on mortality rates

The ONS will announce updated population projections, including assumed mortality rates, in November. Our analysts will be looking at the findings and, asking what they might mean for the legacy sector – watch this space.

With big changes afoot regarding the future of the Wills Notifications Service, Legacy Foresight is working closely with colleagues from the Institute of Legacy Management to try to ensure the best possible solutions for both the short and long term.

The Wills Notifications Service is an essential tool for charities, that enables them to manage the administration of estates, forecast their legacy income and plan their services accordingly.

Our analysis team has been working to quantify the impact a break in the notifications service would have on the sector. While there is a commitment from HM Courts & Tribunals Service (HMCTS) and the Ministry of Justice to ensure there is a seamless transition to the new system, any delay in developing the new service could have serious implications on charitable incomes and therefore their spending on services.

As our Consortium members’ legacy income accounts for 50% of the market in value terms, we believe that over the coming year Legacy Monitor will play an even more important role as the sole source of aggregated market information. Although Legacy Foresight cannot adjust the data we report to account for any missing bequests, we can monitor and comment on the changes as they unfold. We hope that this information will be useful for sector-wide lobbying as well as helping individual legacy teams to track and forecast their own legacy performance.

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Legacy Foresight has been collecting and analysing legacy data for 25 years and with each year that passes we have more and more intelligence from a wealth of different sources. With this data at the heart of what we do, we are always looking at ways to innovate and improve our processes. We are therefore very excited to now be moving towards integrating our multiple data sources into a shiny new database!

This will mean the legacy market and charity performance data used in the Legacy Monitor and forecasting programmes can be stored and analysed with greater ease, speed and efficiency. The database solution will be more robust and scalable whilst remaining fully secure and compliant with data protection rules. Additionally, we’ll be able to output the data using built-in reporting techniques meaning less time on routine tasks and more time on delving into the data.

This is one of the most common questions legacy fundraisers ask, and the hardest to answer. But now help is at hand!

Building on our long experience in medium-term forecasting and our recent legacy marketing benchmarking programmes, we have developed a methodology to evaluate both the financial impact of an additional investment in legacy marketing and the time it will take to see any return on this investment.

For more on our legacy marketing evaluation service, download the brochure here or contact Kath Horsley.

Rises in life expectancy dropped from 12.9 weeks per year for women from 2006 to 2011 to 1.2 weeks per year from 2011 to 2016, its report found.

This increase in life expectancy for women was the lowest of the 20 nations, while for men only the US was worse.

But what does this mean for the legacy sector? We’ll come back over the next few weeks, once our analysts have digested the findings!

Meanwhile for more information, follow this link .

The complex topic of life expectancies was discussed in our recent Viewpoint where we looked into the latest ONS forecasts which show that although life expectancies continue to increase, the projected rise has slowed down. Digging deeper into this topic another interesting theme has emerged : the polarisation of life expectancies across the UK.

Although life expectancies are increasing for all socio-economic groups, the largest increases are occurring amongst wealthier groups. According to a report by the International Longevity Centre “Evidence shows that living in a deprived area is strongly linked with higher mortality and lower chances of survival”.  It seems that disparities in life expectancies are driven by inequalities in people’s everyday lives; that is within housing, education and working conditions. These in turn can lead to poorer lifestyle choices such as smoking, drinking, poor diet and little exercise.

Certainly, improvements in smoking and obesity rates have not been seen across all socio-economic groups. According to the ILC report on the inequality gap “deaths are increasingly from chronic diseases rather than infectious diseases or environmental causes. Since chronic disease is often attributable to life choices such as smoking and diet, the blame for the widening must be laid increasingly at the door of individual lifestyles.”

Within regions or even within one city, the inequalities in life expectancies appear to be stark. The ONS life expectancy data from 2001 to 2016 show some clear locational polarisations; be it North versus South or within a specific region, there are evident divides.

The charts below illustrate the differences within one region – the North West of England – comparing Blackpool and Cheshire East.  Here we can see that people in the wealthier Cheshire East are living significantly longer than those in the poorer area of Blackpool, with the largest gap being for males, where life expectancy in Blackpool is six years lower.  In this case, we can also see that for both males and females that gap is widening over time.

Moving on to the North-South divide, the ONS data show that every region in the North has a lower life expectancy than the UK average, whereas in the South all regions are above average. For example, men in Scotland are currently living 2.1 years less than the UK average and looking specifically at Glasgow, one of the UK’s poorest areas, this falls to six years less.

So what might this mean for the legacy sector? This divergence of life expectancies indicates that the slowdown in projected life expectancies may be driven by the less wealthy sections of the population.  This is particularly true when it comes to the Baby Boomers who – as we showed in our recent Viewpoint – are more polarised than older generations, with some groups at far greater risk from smoking, poor diet and high BMI than others.

It could then be that affluent people, who are the most likely to leave charitable bequests, will not experience such a rapid increase in deaths over the next ten years. This in turn suggests that the overall death projections will not have a proportionate impact on the number of legacies received by UK charities – in other words. the number of gifts in wills may rise more slowly than overall deaths.

As always with demographic trends, the devil is in the detail! We will continue to monitor death rates, along with other vital social factors, in the years ahead.