How socio-economic factors drive significant life expectancy gaps

Research reveals significant life expectancy disparities among Australian retirees, challenging assumptions about retirement product pricing and equitable outcomes

Picture two Australian retirees, both turning 60 in the same year. One lived in Sydney’s affluent eastern suburbs, owned their home, earned a comfortable income, and enjoyed a stable marriage. The other resided in a disadvantaged area, rented their accommodation, earned less than $500 per week, and remained single. The stark reality revealed by groundbreaking new research is that these two individuals faced dramatically different life expectancies – with a gap that could stretch beyond 11 years for men and nine years for women.

This sobering discovery emerges from the most comprehensive analysis of Australian retirement mortality ever undertaken, examining the entire population aged 60 to 100 over 2016-2017. The findings expose profound inequalities that challenge fundamental assumptions about how Australia’s superannuation system prices retirement products and delivers equitable outcomes. The research used individual-level linked data from the Australian Bureau of Statistics, covering more than 57,000 female deaths and 58,000 male deaths, corresponding to more than 2.4 million and 2.1 million years of exposure respectively.

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The implications extend far beyond academic interest. In a practical example from the research, for a $100,000 investment at age 65 with a 3 percent interest rate, the annual income from a pure lifetime annuity ranged from $6896 for females and $8521 for males with the shortest life expectancy, to just $5387 for females and $5785 for males with the longest life expectancy. This represents a 28% difference in retirement income based purely on socio-economic circumstances.

The scale of Australia’s longevity divide

The research, Towards Fairer Retirement Outcomes: Socio-Economic Mortality Differentials in Australia, was conducted by Associate Professors Fei Huang and Andrés M Villegas from the School of Risk and Actuarial Studies at UNSW Business School together with Associate Professor Francis Hui from The Australian National University’s School of Finance, Actuarial Studies and Statistics. The study leverages individual-level linked data from the Australian Bureau of Statistics’ Personal Level Integrated Data Asset, enabling an in-depth analysis of socio-economic mortality differentials across the Australian population. The project was carried out with the support of the Australian Government Actuary, Guy Thorburn and his team, whose collaboration played a key role in facilitating the research.

The methodology employed sophisticated regression models to examine mortality patterns across multiple socio-economic indicators including area-level advantage and disadvantage, income, marital status, and home ownership. This approach allowed researchers to account for a well-established trend: differences in mortality between socio-economic groups tend to narrow with age. It also helped avoid problematic mortality crossovers, where individuals in disadvantaged groups might incorrectly appear to have lower mortality than those in the most advantaged groups.

“We were motivated by a simple but powerful question: Does Australia’s retirement income system account for how long people actually live after retirement – or does it assume we’re all the same?” Dr Huang said. “We suspected there were large, hidden disparities in longevity that the current system ignores. And we wanted to provide rigorous, population-wide evidence to support fairer retirement policy and product design.”

To make the research more accessible to both industry and the public, the research team has open-sourced the dataset as the Australian Socio-economic Mortality Dataverse, and launched the Australian Longevity Explorer — an interactive dashboard that helps users understand their expected longevity at age 60 and visualise mortality patterns across different socio-economic groups.

The magnitude of discovered disparities proved striking. The research revealed substantial variation in life expectancy across the Australian population, with the gap between the most socio-economically disadvantaged and advantaged males reaches 11.5 years, while for females, the corresponding gap is 9.1 years.

The study found significant mortality differentials associated with multiple factors. As the researchers noted: “We find significant mortality differentials associated with IRSAD decile, marital status, home ownership, and personal income. These disparities tend to diminish with increasing age and become negligible by approximately age 100 for IRSAD decile, marital status, and income.”

Life expectancy varies by socio-economic factors

Using the socio-economic indexes for areas, the research tracked how mortality rates varied systematically across Australia’s social geography. The study examined the entire Australian population aged 60-100 over the twelve-month period from September 2016 to August 2017, providing unprecedented insight into retirement mortality patterns.

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Home ownership emerged as a particularly powerful predictor of longevity. The researchers observed “a clear and consistent mortality gap before age 68, where home ownership status is available and reliably measured, with homeowners experiencing lower mortality than non-homeowners across both genders.”

Marital status also demonstrated significant associations with survival prospects. The findings showed that “unmarried individuals have higher mortality compared to their married counterparts across both genders,” with the mortality differentials being “bigger for males than females.”

Income levels created additional stratification in mortality risk. The research documented that “individuals in higher income groups tend to have lower mortality rates,” though the patterns proved complex across different income brackets.

The superannuation system’s blind spot

These findings expose a fundamental challenge for Australia’s retirement income system. The research highlighted how current pricing approaches fail to account for the dramatic variations in mortality risk across different population groups.

The study’s authors warned that “uniform approaches to longevity product pricing may unintentionally disadvantage certain groups.” When retirement products ignore mortality differentials, they create hidden transfers between different socio-economic groups. The researchers explained that uniform pricing “can result in a cross-subsidy from disadvantaged groups to wealthier, healthier retirees.”

This dynamic could undermine the system’s effectiveness and fairness. As the study noted: “Such pricing may appear neutral, but in practice it may exacerbate inequality and undermine confidence in retirement income products. It could also lead to adverse selection and further undermine the viability of the longevity risk pool.”

Charting a path forward for fairer retirement outcomes

This research provides crucial evidence for reforming Australia’s approach to retirement income. The study demonstrates how mortality heterogeneity could be incorporated into more equitable system design.

For product designers, the evidence supports developing pricing approaches that reflect actual mortality risks across different population groups. The research suggested that “incorporating heterogeneity in mortality into pricing frameworks could improve equity, reduce barriers to product uptake, and support the goals of the Retirement Income Covenant.”

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Policymakers should consider how regulatory frameworks might encourage greater recognition of mortality differences in product design. The researchers concluded that “a better understanding of post-retirement mortality patterns can support more equitable product offerings, inform appropriate policy settings under the Retirement Income Covenant, and ultimately contribute to fairer and more sustainable outcomes in the superannuation system.”

For retirees themselves, Dr Huang said that understanding how longevity varies by personal and socio-economic circumstances can lead to more informed and realistic planning. “Rather than relying on population averages, individuals can make better decisions about drawdown strategies, annuity purchases, or how long their savings need to last,” she said.

The study’s final recommendation was clear: “As the superannuation system continues to evolve, evidence-based approaches that reflect real differences in longevity risk will be essential for designing fair and sustainable retirement income solutions.”