Modelling the reverse select and ultimate mortality experience of UK ill-health retirement occupational pension scheme members

Retirements from the workforce can be split between those who are forced to retire early specifically for health reasons referred to as ill-health retirements and all other retirements referred to as normal-health retirements. Rates of ill-health retirement increase with age and are higher for females than males. Consequently, the mortality experience of ill-health retirement pensioners will become more important in the future as pension schemes increase their normal retirement age in line with increases in life expectancy and the proportion of women in the workforce and therefore in occupational pension schemes increases. This paper seeks to model the mortality of ill-health retirements from occupational pension schemes in the United Kingdom in the period immediately following retirement (reverse select mortality) and over the longer term (ultimate mortality) allowing for age at retirement. Females experience a longer reverse select period than males and for both males and females the improvement in mortality rates over the reverse select period is greatest at younger ages. Post the reverse select period the effect of age at retirement decreases over time with ultimate mortality rates converging by the mid-eighties for males and females.