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Wide variance seen in EU mortality assumptions

EUROPE – A new study has found a wide variation in mortality assumptions across the European Union.

It found that the typical future life expectancy for a 65 year-old male varied from 24.2 in France to 15.1 in Denmark – which could not be explained by underlying demographic trends.

The study found that if UK firms used the same basis as German, then the £40bn (€58.5bn) aggregate UK pension deficit would turn into a surplus of £3bn.

The study was put together by the Cass Business School and the Actuarial Profession with input from Mercer Human Resource Consulting.

“The study confirms the results of Mercer's research into mortality assumptions used in Europe, and illustrates the importance of disclosing the mortality basis used by companies,” said Mercer principal Phil Turner.

“Although the accounting standard IAS 19 does not explicitly require employers to disclose mortality bases, we would recommend companies reveal the demographics of the workforce and the rates used.”

He added: There are some legitimate reasons why mortality expectations may differ between countries. In France, for example, employer-sponsored pension plans tend to only cover higher earners who generally live longer, while in Germany they cover lower-level employees.

“If multinational companies are aware of the differences in assumptions used, they can make a judgement about whether the deficit shown in company accounts is a realistic reflection of the underlying pension liabilities.”

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