Longevity assumptions are set in the planning timeline using client-specific Mortality events. You can easily change these mortality ages as a baseline assumption or in particular scenarios and are encouraged to have a discussion about these assumptions with your clients. Mortality events can be easily repositioned on the timeline or can even be replaced if modeling a longer or shorter than anticipated lifespan, typically in a what-if scenario. We will show you how this is done in this topic.
About Mortality events
In the timeline below, clients John and Julia have Mortality events, both of which are set at age 85. Being the younger of the two, the plan will effectively end when Julia dies at age 85. Mortality events set the life expectancy for each client. For purposes of the plan, Julia, will live until age 85, year 2060. With Julia's death, the planning timeline will end and her estate distributed.
The software assumes that a client's death occurs at the beginning of year in which a that person's Mortality event is placed.
The software does the following upon a client's Mortality:
- Benefit payouts are made from active protection policies.
- Lump sum payouts are made from Money Purchases or the funds are transferred into a survivor's pension.
- Survivorship and joint payout options are applied to drawdown pensions and annuities, depending on how you configure them.
- Bonds (onshore and offshore life funds) are liquidated and distributed to beneficiaries.
- Property/assets, if co-owned, will pass to the surviving spouse/partner. If the property asset is not co-owned it will be liquidated and the proceeds will pass through the estate distribution.
- Employment and other income earned by the deceased will end unless it is an Other Income source specially tagged "Income Survives Owner".
- Expenses, if owned solely by the deceased, will end at mortality.
If an expense is co-owned it will continue in the plan at previously set levels. We make no assumptions about which expense should decrease since a plan might contain a mix of expenses, some of which might not be decreased. One's mortgage payment, for example, would not decrease whereas one's living expenses, in general, probably would.
Note: If expense reductions are a concern, consider dividing between client and spouse any expenses that should be reduced automatically upon mortality.
- The deceased's estate is liquidated and distributed either by default to the surviving spouse/partner or as specified on the
Estate Plans screen.
Most of these payouts and distributions as well as the calculation of potential IHT can be viewed on the Overview > Legacy screen, by selecting the Plan Legacy tab.
Preferences - Default Mortality Age
The default life expectancy for your clients is set on the timeline, at least initially, based on the software's Preferences.
On the left side of the Preferences screen are the System Preferences, which serve as a template set of assumptions.When you create a new client case a copy of the System Preferences will be written into your client's Plan Preferences, which are shown to the right side of the Preferences screen. The Plan Preferences are the assumptions actually being used in the plan/scenario that you are viewing at the moment.
The Default Ages > Mortality Age preference is used only initially to set the length of your client's timeline.
Once you have created a new client case, this setting, which is taken from the Plan Preferences on the right side of the Preferences screen, becomes only informational. Any changes to your client's life expectancy would need to be made manually on the timeline, as described below. This preference may be written into the Default Preferences report. If you are presenting this report to clients, consider editing this plan preference to reflect the actual placement of your client's Mortality on the timeline.
How to change a client's life expectancy
If you need to change the mortality age of a client, go to the Time screen, left-click on the client’s mortality event and drag it up or down the timeline. Moving a mortality event up the timeline should present no problem. You may need to pause periodically to allow the timeline to redraw.
Moving the Mortality event to model an earlier than expected lifespan
If you are modelling an early mortality scenario, rather than move the Mortality event, use a replacement mortality event instead. Read more >>
The Mortality event is usually used as a stage boundary, as is noted by the perforated box surrounding its icon. This event (or combination of two events in plans for couples) is used to mark the end of the timeline. It also bookends the final stage in the plan. Being a stage boundary, the Mortality event is limited in how far it can be moved down the timeline, usually due to an adjacent stage. In most cases this adjacent stage will be Pre-Retirement.
Stages cannot overlap and therefore an event used as a stage boundary cannot be dragged over into an adjacent stage. Again, if you want to model an early mortality scenario, create a what-if plan and use a drag and drop replacement mortality event instead. Read more >>