UK - Pension schemes' liabilities could increase by a quarter because of the wide range of mortality assumptions used, a study has found.
The annual Accounting for Pension Costs Survey by actuarial and consultancy firm Barnett Waddingham found the wide spread of life expectancy assumptions used could alter the typical pension scheme's liabilities by around 25%, with significant consequences for debt.
"The liability for a typical £200m scheme could go up to £250m - increasing by £50m," the firm said in a statement yesterday, adding "if the scheme had assets of £180m (90%), the pre-tax debt would increase from £20m to £70m - an increase of 250%."
Barnett Waddingham also said life expectancy range from 20 to 27.5+ years, while more companies disclosed their life expectancy assumptions this year, with 50% in 2005, disclosure was up 25% in this year's survey.
The study each year analyses the assumptions adopted by FTSE100 companies for determining the value of their pension liabilities.
Adrian Waddingham, senior partner of the company, commented: "Although the accounting standards do not explicitly require the disclosure of life expectancy assumptions we are seeing more and more companies doing so due to their increasing importance in pension calculations.
"Though this year's results revealed a relatively wide spread of life expectancy assumptions mortality can never be ‘one size fits all' and comparisons must be treated with respect. Different industries, locations and socio-economic classes mean trustees and employers may be using different assumptions and must continue to commission detailed reviews of their own experience," he added.