Skip to main content
The Actuary: The magazine of the Institute and Faculty of Actuaries - return to the homepage Logo of The Actuary website
  • Search
  • Visit The Actuary Magazine on Facebook
  • Visit The Actuary Magazine on LinkedIn
  • Visit @TheActuaryMag on Twitter
Visit the website of the Institute and Faculty of Actuaries Logo of the Institute and Faculty of Actuaries

Main navigation

  • News
  • Features
    • General Features
    • Interviews
    • Students
    • Opinion
  • Topics
  • Knowledge
    • Business Skills
    • Careers
    • Events
    • Predictions by The Actuary
    • Whitepapers
  • Jobs
  • IFoA
    • CEO Comment
    • IFoA News
    • People & Social News
    • President Comment
  • Archive
Quick links:
  • Home
  • The Actuary Issues
  • May 2017
05

Life expectancy changes could see UK pension deficit cut by £310bn

Open-access content Thursday 4th May 2017

A slowdown in improving life expectancy may result in £310bn being wiped from the UK’s collective defined benefit (DB) pension deficit, according to analysis by PricewaterhouseCoopers (PwC).

2

Figures released today by the firm show that the deficit of DB pension funds stood at £530bn at the end of April 2017 - a £30bn increase since the previous month.

However, it was found earlier this year that life expectancy is improving at a slower rate than at the start of the century, and if this trend continues, PwC believes the deficit could be cut to £220bn.

"That puts a fuller funding situation within reach for many pension funds, without relying on excessive cash contributions to repair deficits in the short-term," PwC global head of pension Raj Mody, said.

"For example, if assets grew by an extra 1% a year than otherwise assumed when working out deficits in the first place, that on average would cover pension liabilities without the need for company cash contributions."

This research comes on the same day that Mercer released findings that reveal £2.5bn could be shaved off FTSE350 pension scheme liabilities, as a result of stalling mortality improvements.

However, the consultancy firm found that schemes are anticipating life expectancy to be improving over the long-term, meaning that pressures on DB pension deficits are likely to continue to increase.

"While, in the short-term, life expectancy increases have slowed, medical research, application of past breakthroughs, innovative use of technology and potential for lifestyle improvements all mean that lifespans will continue to increase," Principal at Mercer, Glyn Bradley, said.

In addition, the analysis highlights the difference between the requirements of companies and pension scheme trustees, with the latter using 'prudent' mortality assumptions when calculating assets, in comparison with corporate accounts which use 'best estimate' ones.

Bradley continued: "Employers and trustees should continue to pay attention to improvements in mortality and use the latest data to ensure short-term improvements are not over-stated.

"Given the long-term direction of life expectancy, all companies and trustees should be investigating how they can remove the financial risk that it poses to their financial health, either through asset allocation, the use of bespoke longevity hedges or the more streamlined longevity solutions now available."


Sign up to our free newsletter here and receive a weekly roundup of news concerning the actuarial profession

This article appeared in our May 2017 issue of The Actuary.
Click here to view this issue
Filed in:
05

You might also like...

Share
  • Twitter
  • Facebook
  • Linked in
  • Mail
  • Print

Latest Jobs

Capital Analyst- no capital experience required

London (Central)
£Competitive
Reference
121218

Pricing Analyst looking to broaden experience?

London (Central)
Up to £55,000
Reference
121217

Head of Pricing - International

BMD excellent
Reference
121202
See all jobs »
 
 

Today's top reads

 
 

Sign up to our newsletter

News, jobs and updates

Sign up

Subscribe to The Actuary

Receive the print edition straight to your door

Subscribe
Spread-iPad-slantB-june.png

Topics

  • Data Science
  • Investment
  • Risk & ERM
  • Pensions
  • Environment
  • Soft skills
  • General Insurance
  • Regulation Standards
  • Health care
  • Technology
  • Reinsurance
  • Global
  • Life insurance
​
FOLLOW US
The Actuary on LinkedIn
@TheActuaryMag on Twitter
Facebook: The Actuary Magazine
CONTACT US
The Actuary
Tel: (+44) 020 7880 6200
​

IFoA

About IFoA
Become an actuary
IFoA Events
About membership

Information

Privacy Policy
Terms & Conditions
Cookie Policy
Think Green

Get in touch

Contact us
Advertise with us
Subscribe to The Actuary Magazine
Contribute

The Actuary Jobs

Actuarial job search
Pensions jobs
General insurance jobs
Solvency II jobs

© 2021 The Actuary. The Actuary is published on behalf of the Institute and Faculty of Actuaries by Redactive Publishing Limited, Level 5, 78 Chamber Street, London, E1 8BL. Tel: 020 7880 6200