UK - The Pension Protection Fund (PPF) has appointed Hewitt to provide advice on the scheme's exposure to longevity risk.

Hewitt revealed the position is a continuing role with the PPF, rather than a fixed-term contract, where it will assess the extent of the PPF's current and future longevity risk exposure and develop a "cost benefit analysis" outlining ways for the scheme to mitigate the risk.

At the end of March, the PPF accepted its 100th scheme and confirmed it is paying, or will pay, 31,191 people compensation at an average of £4,700 (€5,261) a year, which equates to a total expenditure of around £4m a month, and the issue of longevity is highlighted as recipients range in age from six to 101.

Martin Clarke, director of financial risk at the PPF, said: "The PPF is subject to the influence of continued improvements in life expectancy and it is vital that we understand all their ramifications and their financial consequences."

As figures from the PPF last month showed there are still around 290 schemes still in the assessment period to determine whether they are eligible to enter the fund, including schemes belonging to Woolworths, subsidiaries of Waterford Wedgwood including Royal Doulton, and Nortel scheme. (See earlier IPE articles: PPF 'concerned' over future claim growth; PPF ready to face Nortel's £1bn deficit; Waterford Wedgwood UK schemes head for PPF and Woolworths highlights importance of employer covenant)

Clarke said: "During the tender process, the Hewitt team demonstrated both the depth of understanding and expertise to help us model our current risk profile and also the ability to help construct a risk management framework which we can take into the future."

Martin Bird, head of UK longevity solutions at Hewitt, claimed the consultancy has "developed the most advanced thinking and modelling available within the UK on all the issues associated with increasing life-spans and the effects they are having on pension provision".

"The PPF is playing a key role in providing stability within the UK pension system so we are delighted to be working with it on all aspects of longevity risk," he added.

If you have any comments you would like to add to this or any other story, contact Nyree Stewart on + 44 (0)20 7261 4618 or email nyree.stewart@ipe.com

Topics