UK pension fund liabilities could fall by up to 2% due to revised mortality figures, according to Willis Towers Watson.
New data from the Continuous Mortality Investigation (CMI), which monitors UK longevity trends, showed standardised mortality rates improved by 2.6% a year on average between 2000 and 2011, but since then “have been close to zero”.
Stephen Caine, senior consultant at Willis Towers Watson, said: “For some schemes about to embark on new funding negotiations, adopting [new CMI data] could cut life expectancy for a male retiring now by around six months compared with the assumptions made when they last went through this process three years ago. This could represent a reduction in liabilities of up to 2%.”
However, Aon Hewitt has warned that the same data could mean some pension schemes finding themselves at the wrong end of poor pricing in the longevity hedging market.
Tim Gordon, head of longevity at Aon Hewitt, said: “It is increasingly difficult to argue that the fall off in national mortality improvements since 2011 is simply a blip. However, the underlying picture for pension schemes is complex and, accordingly, a more tempered view is appropriate.”
Gordon added that the longevity swap market was “in a state of flux”.
“With changing or incomplete data, there remains a risk that schemes considering hedging their longevity risk may end up with poor pricing, or make a decision based on out-of-date information,” he said.
In its 2016 update, the CMI said: “Mortality improvements in the general population since 2011 have been unusually low compared to the earlier part of this century.”
Figures to the end of December 2016 showed life expectancies at age 65 were 1.3% lower for males and 2% lower for females when compared to 2015 data, the CMI said.
Premier Foods reduces pension bill
Premier Foods, the listed food manufacturer, has reduced its pension spending by £32m for the next three financial years owing to an improvement in its pension schemes’ funding levels.
For the three financial years from 2017 to 2020, Premier Foods will pay £107m into its pension schemes, versus £133m under its previous arrangement. In addition, its administration costs are expected to fall by £2m a year due to a contribution from one of the group’s pension schemes.
Between 2020 and 2023 the company will pay £114m into its schemes, compared with £101m under the previous arrangement.
The owner of popular UK brands including OXO and Mr Kipling revised its deficit reduction payments following a 2016 actuarial valuation. Chief financial officer Alastair Murray said this would allow the company to “focus on maximising the company’s free cash flow generation and debt reduction”.
Performance monitor for LGPS
KAS Bank is to provide investment performance reporting and monitoring services to the UK’s local government pension schemes (LGPS).
The company was appointed through the LGPS’ central framework for tenders, administered by Norfolk County Council.
Pat Sharman, managing director for the UK branch of KAS BANK, said: “By providing independent performance measurement, we provide our clients with information that helps them with the governance of their scheme, engage in conversations with their service providers based on unbiased information and, where needed, execute decisions in the interest of all the members of the scheme.”
NHS employers to pay pension admin costs
Employers in the National Health Service (NHS) Pension Scheme are to pay an additional 0.08% of pensionable pay towards administration costs, the government has ruled.
From 1 April, employer contributions to the unfunded scheme will rise from 14.3% to 14.38%, the UK’s Department of Health announced last week.
The NHS Pension Scheme has more than three million members, including 850,000 pensioners.