UK - The UK government has rejected the Pensions Commission's suggestion that it should issue so-called "longevity bonds" to deal with future mortality rates.

The second report of the Commission headed by Lord Turner had called on the government to consider the issue of such bonds "which absorb (at an appropriate price) the risks relating to uncertain future mortality rates among very old people".

The government said today that issuing longevity bonds "would transfer additional longevity risk onto the government's balance sheet, which would raise policy issues that extend beyond a strict interpretation of debt management policy".

"The government maintains an open mind on issuing longevity bonds, but has no current plans to issue such bonds," it added.

The comments came in a 31-page analysis of the annuities market that was released alongside the Pre-Budget Report today.

The government revealed it would review the market following a commitment made earlier this year and in response to comments by the Pensions Commission.

It said the market has more than tripled in size in the past 15 years, with nearly 300,000 new contracts written in 2005 totalling £8bn.

"This trend is expected to continue; in addition personal accounts will result in an estimated 8m new pensions savers."

The review of the so-called open market option, whereby people can shop around to get the best annuity deal, will work with "key stakeholders in and outside government".

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