UK - Revised mortality tables will see pension fund liabilities rise by £5bn across the industry, Aon Hewitt has warned.

The recent publication of new mortality data by actuaries as part of the industry-wide Continuous Mortality Investigation (CMI) has seen the life expectancy of an average occupational pension scheme member rise ahead of expectations.

Martin Bird, head of longevity and risk solutions at Aon Hewitt, has predicted the change will result in an increasing number of longevity swaps in the near future.

"Increased life expectancy is good news for the individual, but bad news for their occupational pension schemes, which will see liabilities rise by about 0.5% or £5bn across the whole industry. 

"Even though this latest increase is only slightly higher than expected, it still triggers a jaw-dropping sum in liabilities."

Bird said more large schemes would be likely to consider longevity swaps as funding levels improved across the industry, resulting in a stronger swap market.

"Our expectation is that there will be £15bn of longevity trades in 2011 in either longevity swaps or buy-ins," he added.

The CMI noted that the main changes in the new data over last year's mortality tables was the inclusion of the most recent mortality data for England and Wales by the Office of National Statistics.

Several other consultancies have recently predicted an increase in buy-ins and buyouts, with Hymans Robertson predicting that 25% of FTSE 100 companies will have completed a risk transfer deal by 2012.
 

Topics