UK - Around 25% of UK corporate sponsors have implemented measures to control the longevity risks in their pension scheme, according to a new study by Watson Wyatt.

The survey of 70 senior finance, treasury and pensions executives from companies with defined benefit schemes found that many sponsors have already taken steps towards offsetting or hedging longevity risks.

A quarter are using for instance mortality risk transfer products and mortality sharing benefit design, said Watson Wyatt today.

Another 25% are considering hedging, while 8% intend to hedge or buy-out.

"Unanticipated increases in life expectancy can represent a significant unhedged risk for pension schemes," said Steven Dicker, a senior consultant in the firm's corporate consulting group, in a news release.

He added: "We are finding that longevity is increasingly being looked at in conjunction with value at risk analyses and other risk management techniques. Benefits are being redesigned to offset longevity increases, and a market is developing to allow schemes to insure or 'swap away' longevity risk."

According to the firm, some companies are looking at benefit design changes that explicitly introduce a mortality sharing factor, so benefits are earned according to the standard formula but would be scaled back at retirement if longevity has increased faster than expected.

The survey also found that 30% of companies think their share price is very sensitive to their pension risk.

Dicker commented that for about a third of companies, possibly those with the largest schemes, it is felt to be a major factor

"We know that companies have their doubts as to how closely analysts look at pensions risk and the extent of its impact on share price," said Dicker.

But for about a third - possibly those with the largest schemes - this is felt to be a major factor, he added, saying: "This perhaps reflects a growing interest in pensions risk from analysts and investors."

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