Adviser studies show longevity on the rise

Mercer’s annual pension accounting survey reported FTSE 100 companies had increased their longevity assumptions by six months, increasing pension liabilities by 20%.

Separately, figures published in Lane Clark & Peacock’s (LCP) Accounting for Pensions report showed UK longevity assumptions had risen 0.4% during the past 12 months, with the average life expectancy now standing at 86.9 years old.

Andrew Gaches, longevity consultant at Hymans Robertson’s ClubVita, said Mercer’s estimates reflected companies catching up with increases in previous years.

“The six-month rise in longevity assumptions is different to what we are seeing in actual life expectancy.

“Life expectancy increased by between three and four months in 2009. Some companies assumed the [longevity] increases were going to tail off rapidly. Now they have revised those views and feel they have significant catching up to do.”

Gaches added 60% of the three to four-month increase was due to lifestyle factors and 40% was due to medical interventions.

According to LCP’s figures, FTSE 100 companies continue to believe UK employees will live longer than their European colleagues.

By comparison, Ireland’s life expectancy rose by 1.1 years to 86 years old and the Netherlands by 0.8 years to 83.9.
Individual FTSE 100 companies also reported significant changes in their assumptions, with Anglo-American predicting its European male employees would outlive their American colleagues by 4.1 years.