Few schemes allow for longer longevity projections
UK - Less than 1% of UK pension fund sponsors leave room for wider mortality improvement factors to value future liabilities, says Barnett Waddingham.
In a presentation about mortality, Nick Salter, partner at the actuarial and consultancy firm, revealed of the 97% of schemes that use the standard pensioner tables, most employ short and medium cohort projections.
Quoting research by the UK's Pension Regulator (TPR), which shows a reluctance among schemes to strengthen mortality assumptions, Salter urged company sponsors to review their assumptions.
"Pension schemes need to get their company to put it on its radar screen. Mortality is a monster in the corner," he said.
Many schemes use standards tables drawn up on the basis of the Continuous Mortality Investigation (CMI), the UK Actuarial Profession's project collecting mortality data, with a so-called ‘cohort adjustment'.
These adjustments are patterns of improvement factors, taking their name from the phenomenon of the group, or ‘cohort', of pensioners born between 1925 and 1945 whose longevity seems to be improving at a faster rate than for those born earlier, Salter explained.
The actuarial profession created short, medium and long versions of the cohort adjustment, referring to the length of time over which we might expect longevity to continue to improve at the rates now being observed.
"The long cohort is better," said Salter, as the medium cohort might not sufficiently project current improvements.
He added schemes should produce a scheme-specific table for today, and add a standard projection for the future.
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