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The Longevity Prospects of Australian Seniors: An Evaluation of Forecast Method and Outcome

Leonie Tickle and Heather Booth

Abstract

Continuing rapid changes in the level and pattern of mortality require that forecasts are available that are timely, relevant and reliable. This paper evaluates a previous forecast of the mortality and longevity of Australian seniors, both in terms of the validity of the chosen method – the Booth–Maindonald–Smith (BMS) variant of Lee–Carter – and the accuracy and reliability of the forecast itself. The validity of the method is assessed by a comprehensive review and evaluation of available methods, confirming BMS as the method of choice. The accuracy and reliability of the forecast is assessed by comparing it with actual experience and with a new forecast of period and cohort survival probabilities and life expectancies. The evaluation and the current forecast itself will inform the actuarial profession and wider industry in the areas of mortality and longevity risk as well as public debate and policy in population health and ageing.

Acknowledgements

The authors would like to acknowledge the support of the Actuaries Institute through a 2010 Australian Actuarial Research Grant, and helpful comments from three anonymous reviewers.

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  1. 1

    Decomposition by cause must be used for explanatory approaches; see Section 2.

  2. 2
  3. 3

    In order to standardise notation across models, notation is not always in the form presented by the original authors. a and b terms are used for age-related effects, k terms for period-related effects, and ι terms for cohort-related effects. Some models originally expressed in terms of the force of mortality are expressed in terms of the central mortality rate, which is equivalent under the assumption of a constant force of mortality over each year of age.

  4. 4

    According to Berry, Tsui, and Jones (2010), Australian male 1925–1935 birth cohorts have experienced higher rates of past mortality improvement. These cohorts are now aged 75–85: it is not known that such effects will persist, and the impact of any ongoing effects would be limited by the relatively short remaining future lifetime. No cohort effects have been identified for Australian females.

Published Online: 2014-3-4
Published in Print: 2014-7-1

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