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IPE special report May 2018

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Falling mortality rates to increase liabilities by 1%, actuaries warn

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  • Falling mortality rates to increase liabilities by 1%, actuaries warn

NETHERLANDS - Revisions to Dutch mortality predictions could add another 1% to pension funds' liabilities, the Actuarial Society (AG) has warned.

After fine-tuning its estimate for the 2010-60 period, the AG found that mortality expectancy had seen a stronger downturn over the last two years than it had during the entire period between 1988 and 2010.

It said life expectancy for both men and women was higher than expected, and that the increase for men was even accelerating.

After making its revisions, the AG estimated that life expectancy for females born between now and 2062 would have increased from 82.9 to 87.4 years, and for males from 79.2 to 86.9 years.

Women who are 65 in 2062 can expect to live 89.3 years on average, whereas men of the same age will reach the age of 88.2 years on average, the AG predicted.

Responding to the findings, Towers Watson stressed that pension funds could improve their view on future liabilities by taking into account income differences and sectors.

It said it had introduced a new model for mortality experience, which corrects mortality assessments for a pension fund's specific participant characteristics.

The model shows, for example, that the mortality assessment for a 40-year-old male from the lowest income category is twice as high as someone with an average income.

Towers Watson's model uses figures from Statistics Netherlands (CBS), which can be directly linked to pension funds data, according to the pensions adviser, adding that the model can deal with six income groups in three sectors.

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