Life expectancy for scheme members is less than predicted by the insurance company-based tables used by many schemes for accounting and funding assumptions. This is indicated by new mortality tables for self administered pension schemes issued by the actuarial profession. Failure to allow for this difference would lead to an overstatement of total UK defined benefit pension liabilities by some £30bn, warns PricewaterhouseCoopers.
The current life expectancy for a typical 65-year-old pension scheme member is one year less than predicted under the insurance company-based tables – at 21 and 22 years, respectively.
With significant variations in life expectancy within and between schemes, disregard for the specifics of an individual scheme could lead to a serious misstatement of that scheme’s liabilities – perhaps as large as 10%.
Richard Giles, director, PricewaterhouseCoopers, commented:
“We welcome the new tables but advise that, rather than blindly adopting the new data as fact, companies and trustees should assess their schemes individually to ensure they make appropriate accounting and scheme funding decisions. Huge sums are at stake here.”
www.actuaries.org.uk
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