Fat not fags?

The most important social phenomenon that affected pension schemes over the past 100 years has been the substantial reductions in smoking.

Lifelong smoking is estimated to reduce life expectancy by around 10 years. Shortly after the end of World War Two around 80% of UK adult males were smokers and around 40% for adult females. Due to government interventions and the increasing knowledge of the dangers of smoking rates have fallen dramatically such that today only 12% of people currently smoke.

This reduction in smoking rates has been one of the key drivers of increasing longevity in the UK driving the majority of the “cohort effect” seen historically and the increase in liabilities for schemes.

It is often reported that people giving up smoking develop a sweet tooth as an alternative and munch on sweets rather than smoking cigarettes. Unfortunately switching from tobacco to sugar is not a particularly healthy choice as being obese has a significant impact on life expectancy, from 3 years at the moderate level to 10 years at severe levels of obesity.

These impacts are worryingly similar to that for smoking at the extreme end. And rates of obesity have doubled in the UK from 15% in 1993 to 29% in 2022. Obesity is now holding back UK life expectancy.

Fear not however for science has brought us diabetes medicines such as semglutode, liraglutide and tirzepatide (more commonly known as Wegovy, Saxenda and Mounjaro) which are now being widely used for obesity management.

Could UK pensions be about to suffer another “cohort effect” as the fat is burned off by the jabs?

Whilst the reduction in obesity expected to be driven by the wider availability of these diabetes medicines is likely to be significant the impact on UK pensions is likely more muted. Especially when compared with smoking.

Firstly of course the health impact of obesity, whilst significant, is not, except at the very severe end as significant as that driven by lifelong smoking. Eliminate this drag on longevity will have a smaller impact than reducing smoking.

Secondly, whilst being obese is common, is nowhere near as common as smoking used to even for women who never smoked at the same near universal rates as men.

Finally, schemes are better prepared. After all the significant improvements in life expectancy since World War Two, with male life expectancy rising from 66 in 1948 to 79 today and a similar improvement for women, schemes are expecting this to continue and hold significant reserves against future mortality improvements. Indeed, these expected improvements are conceived to be driven by better lifestyles and enhanced medical treatments exactly as the weight loss jabs are designed to deliver.

Pension schemes in the UK should not therefore be afraid of weight loss – it is baked into their figures.

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If you'd like to discuss it, or any other matters where we may be able to assist you, please contact Richard Jones on richard.jones@puntersouthall.com