| FOCUS | HEALTHCARE

Signs of ageing
The English Longitudinal Study of Ageing is helping James Banks understand how people perceive
their own futures.

ONGEVITY, HEALTH, ECONOMIC RESOURCES,

and social
and family circumstances are inexorably linked.
In the light of such linkages, how much do we
really know about the fundamental causes of illhealth, disability, and ultimately mortality outcomes in
old age? For that matter, how much do we really know
about the fundamental causes of particular economic,
financial, or social outcomes in old age? The answer is,
unfortunately, not much.
When it comes to data on ageing, the supply of statistics showing correlations is plentiful. Such statistics can
be useful in the short term for forecasting purposes but,
by confusing symptoms with causes, do not allow policymakers to target their interventions appropriately. Nor do
these statistics allow financial institutions to design
products that address the true needs of their potential
customers.
Hopefully this is beginning to change. Economists are
now building past health behaviours and current health
outcomes into models of retirement and are acknowledging the links between health, education, and the accumulation of economic resources over the lifecycle.
Epidemiologists are looking at economic and social
resources, along with inequalities in such resources, as
risk factors for morbidity and mortality. And both groups
are taking up the challenge of showing true causal pathways within and across dimensions.

The depth and breadth of good data

James Banks is director of

the Centre for Economic
Research on Ageing at the
Institute for Fiscal Studies
and professor of economics
at University College
London

30 | TheActuary | October 2004

To investigate these casual pathways requires good data

and existing sources have so far proved inadequate. Representative surveys focusing on one dimension at a time
do not allow investigators to consider the correlation
between dimensions at the individual level, and hence
are not always useful. Those surveys that do cover all
dimensions tend to incorporate crude measures that do
not facilitate appropriately scientific analysis. Finally,
analysis of official data or commercial databases can only
be limited in scope, typically focusing on financial
dimensions alone with minimal other information available. In addition, such analyses cannot account for family or social effects, nor look at the attitudes or
expectations of individuals in various circumstances.
To tackle the limitations of existing data sources,
researchers based at University College London, the Institute for Fiscal Studies, and the National Centre for Social
Research have been designing and collecting new data
with which we can begin to understand the economic,
social, psychological, and health elements of the ageing
process. The English Longitudinal Study of Ageing (ELSA) is
the first study anywhere in the world of its type collecting detailed biomedical, economic, and social data on the

same individuals on an ongoing basis. ELSA is jointly

funded by a consortium of government departments and
the US National Institute on Aging, and it will yield public-use data, while revolutionising empirical work on the
ageing process and associated policy questions.

The ELSA sample

The study recruited over 12,000 respondents aged 50 or
over to be interviewed every two years and given nurse
visits every four years. The data provide a representative
sample of the population of England aged over 50 living
in households. As study members move into institutions
the ELSA sample will become representative of the whole
English population aged 50 and over. Crucially, since the
same individuals are followed as they age, the series of
economic choices and outcomes and their dependence
on health and social factors can be analysed at the individual level, providing an unparalleled empirical picture
of the evolution of life over 50 in England. The first wave
of ELSA data was collected in 2002/3 and the second
wave is currently being collected.
At the core of ELSA are extremely detailed biomedical,
economic, and social measurements. Blood samples are
taken and analysed for known risk factors and respondents undergo physical and cognitive performance tests.
In addition, the health questionnaire collects information on self-reported health and functioning, previous
health histories and behaviours, and limitations in activities of daily life. On the economic side, full details of all
sources of income, employment, asset, and wealth holdings and private pension arrangements are collected,
along with measures of consumption and housing. Furthermore, ELSA collects respondents National Insurance
numbers and requests their consent to link their data to
government records on their history of National Insurance contributions and all benefit receipts (including tax
credits and state pensions). Around 80% of respondents
give permission to link their records, and similar rates are
recorded for permission to link to hospital health records.
Respondents are currently being approached for their
permission to extract and store genetic material from
their blood samples.

Future expectations
The potential of such data is huge and the first fruits are
already coming to bear. The 2002/3 wave of data provided much-needed information when the report and
first tabulations were published in December 2003. Headlines tended to focus on occupational and socioeconomic patterns in disability and morbidity. Also
important was the first evidence of how holdings of total
assets and wealth vary across the population, how

HEALTHCARE | FOCUS |

References
Health, wealth and lifestyles
of the older population in
England: The 2002 English
Longitudinal Study of
Ageing, edited by Michael
Marmot, James Banks,
Richard Blundell, Carli
Lessof, and James Nazroo,
published by the Institute
for Fiscal Studies.
The English Longitudinal
Study of Ageing is publicrelease data that can be
obtained from the UK Data
Archive. Wave 1 ELSA data
collected in 2002/3 has just
been deposited in the UK
data archive and wave 2
data collection is currently in
the field. Funding for waves
3 and 4 is in the process of
being secured. For further
information, see
www.ifs.org.uk/elsa
Not so brief lives: longevity
expectations and
wellbeing in retirement,
James Banks, Carl
Emmerson, and Zo
Oldfield, in Seven ages of
man and woman: a look
at life in Britain in the
second Elizabethan era,
Economic and Social
Research Council, June
2004, www.esrc.ac.uk
/socialscienceweek/docs
/seven_ages.pdf

pension coverage and particular

pension arrangements vary by
wealth and income, and how
employment probabilities at older
ages vary by pension arrangements and health status. Data
from ELSA will also be providing
key evidence for the interim report
of the Pensions Commission this
year.
One further dimension of the
ELSA data is both important and
novel in UK surveys; this is the
collection of quantitative information on expectations of the future.
Respondents are asked the
chances of various events happening to them in the future, on a
scale of 0 to 100, where 0 means
that you think there is absolutely
no chance an event will happen,
and 100 means that you think the event is absolutely certain to happen. On this basis expectations are collected
for, among other things, the chances of living to various
ages, the chances of being in paid work at age 60, the
chances of leaving a bequest and receiving an inheritance, and the chances of future financial problems. Such
questions have been used in the US, and UK trials showed
them to be operating successfully over here, so ELSA
became the first non-US study to use such questions.

How long do you expect to live?

Analysis of expectations data has already shown potentially important results on individual longevity expectations on average people approaching retirement are

Figure 1 Self-perceived chances of living to age 75, by age and sex

75%

Percentage chance

70%

65%

60%

55%

50%
5054
Men

5559

6064

Age

Women
Source: English Longitudinal Study of Ageing 2002

underestimating their chances of living to age 75 (see

James Banks, Carl Emmerson, and Zo Oldfield, 2004). And
women tend to underestimate these chances by more
than men. On average, 6064-year-old women reported a
65% chance of living to age 75. Even estimates of the
true probability based on cross-sectional life tables
would suggest this chance to be more than 80%, and any
projections of cohort increases in longevity would widen
the gulf between these two numbers. (See figure 1.)
Such underestimation of longevity would lead to a
demand for retirement saving that was too low and individuals being unwilling to annuitise wealth on reaching
retirement. As such, it suggests that, when thinking about
the governments informed choice agenda and arming
individuals with greater information on their pension
arrangements, we should think of providing more information on the more fundamental issue of longevity as
well. It also suggests that we need to know much more
about the way in which individuals form their expectations of the future.
Further research on the 2002/3 ELSA data is already
under way. Some of it, partly sponsored by the actuarial
profession through contributions to the IFS consortium
on pensions and retirement saving, will look directly at
the links between public and private pension arrangements and other factors (including expected longevity).
Research will also investigate the way in which cognitive
functioning is associated with financial expectations and
holdings of financial instruments. As each wave of data
builds up, the returns to such ongoing empirical research
will only increase. And in the future, as the academic,
policy-making and business communities generate new
research questions, we will now have the data already in

place with which to investigate solutions.

October 2004 | TheActuary | 31