UK - Differing mortality rate assumptions used by pension fund advisers could be contributing a "margin of error" in pension fund liabilities of around £20bn, suggests research.
An annual study conducted by KPMG reveals life expectancy figures applied by pension funds between current and future pensioners can be as wide as seven years apart depending on the sector pensioners work in, and the "best estimate assumptions" used by actuarial consultants to calculate pensions liabilities can in some cases produce a difference of up to one year between the different consultancies views on life expectancy.
KPMG also looked specifically at the figures for workers of 39 firms in the financial services arena and suggested looking only at this market, the £110bn pension fund liabilities in this market could drop either to £100bn or climb to £120bn depending on which consultants figures they use and the subsequent pensions accounting assumptions - a margin of £20bn.
The adviser firm does not declare which companies it looked at but Alistair McLeish, head of KPMG's pensions practice, expressed surprise at the impact "small variations can have a major effect" on a company's overall pension liability.
"Different companies will have workforces with different demographic profiles so one would expect there to be some degree of difference in their life expectancies," said McLeish.
"However, the ranges that we have found seem rather extreme - particularly in financial services.
"Of course, it's nonsense to think that moving jobs between one investment bank and another would improve an individual's longevity. But it seems rather strange that financial institutions should have such a wide range, given that the companies in the study are believed to have similar, though not identical, workforce profiles," added McLeish.