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The Actuary The magazine of the Institute & Faculty of Actuaries

Consultation concerns

In February, the Pensions Regulator published a consultation on treatment of longevity by pension schemes. The major proposal was to adopt more stringent scrutiny in cases where trustees were using heavier mortality assumptions than would be associated with ‘long cohort’ improvements and a minimum ongoing rate of mortality improvement.

As was the case with January’s ASB consultation on discount rates for valuation within company accounts, public reaction to this new mortality consultation was hostile, with some suggestions that this would be the straw that breaks the back of defined-benefit pension schemes. Consultants and industry bodies were critical of what they saw as a move by the regulator away from the principle of scheme-specific assumptions.

The more thoughtful responses concentrated on the uncertainty that inevitably must characterise projections of mortality — a quid pro quo was sought in terms of easier release of surpluses in the event that mortality ultimately proved to be heavier (or improvement slower) than is implicit in the preferred assumptions.