Pension fund trustees, sponsors 'struggling' to manage longevity risk

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  • Pension fund trustees, sponsors 'struggling' to manage longevity risk

EUROPE - Longevity risk is the second-most important risk factor for pension fund sponsors and trustees, but it is also the least understood, according to a survey conducted by MetLife Assurance.

The company's UK Pension Risk Behaviour Index canvassed 89 trustees and sponsors' on their assessment of 18 investment, liability and business risks.

Most respondents acknowledged they had failed to manage longevity risk effectively, "despite an estimated £1trn of assets being exposed".

MetLife Assurance said its survey clearly showed that pension scheme sponsors and trustees were "struggling" to manage longevity risk - second only to the measurement of technical provisions and liabilities in importance for respondents.

Dan DeKeizer, chief executive at MetLife Assurance, said: "While it's apparent scheme sponsors and trustees show a good understanding of the impact longevity risk poses to their schemes and their organisations as a whole, they seem unable to manage this important risk on their own."

Part of the problem, he said, was a lack of understanding of the options available to better manage this risk, such as ensuring actuarially sound adjustments for early retirement, encouraging later retirement and exchanging higher fixed benefits as a substitute for indexation.

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