The majority of defined benefit (DB) pension scheme trustees have not yet been able to factor in how breakthrough health treatments could affect liabilities, despite their potential to reshape future mortality trends, according to Standard Life.
The insurer’s analysis, published this week, found 88% of DB trustees have not yet assessed the impact of this uncertainty on scheme liabilities.
With 75% of DB schemes in surplus on a low-dependence basis, these positions may come under pressure if mortality improves faster than expected, particularly given that preventable mortality may not yet be fully reflected in long-term assumptions.
Claire Altman, managing director for pensions risk transfer and individual retirement at Standard Life, said: “Uncertainty itself is becoming a key risk factor, as trustees navigate a more complex and less predictable environment, particularly when thinking about long-term liabilities.
“While strong funding positions offer schemes some breathing room, they can change quickly if members live longer than expected. These dynamics can affect benefit duration, liability assumptions and the timing of derisking decisions, while increasing the complexity of modelling future outcomes, particularly for schemes with geographically diverse memberships.”
She added that, for DB schemes that are ready to enter the bulk annuity market, “buy‑in will remain the most effective way to secure long‑term certainty for members, trustees and sponsors”.
Standard Life also said longevity hedging tools, such as longevity swaps, may be useful for schemes not yet ready for buy-in but seeking to manage longevity risk. Several recent buy-ins have involved the novation of these contracts, helping schemes maintain protection against future mortality shifts.
Weight loss and other treatments could shift liabilities
Obesity is one of the UK’s leading risk factors for premature mortality, driving deaths through related long-term conditions.
While recent modelling studies suggest GLP-1 treatments could, under different scenarios, lead to reductions in mortality of around 1.8% to 5.1% over the longer term, outcomes vary widely and depend on uptake, access and long-term effectiveness.
“While headline mortality rates are beginning to normalise, there is now greater uncertainty around future improvements… Outcomes are far less predictable than historic models suggest.”
Claire Altman, Standard Life
Standard Life research shows that 69% of DB trustees have not yet had the opportunity to consider the impact of these weight-loss drugs on life expectancy and benefit payment.
Improved health outcomes could extend how long pensions are paid, creating new considerations for schemes approaching buy-in or buyout.
Longer lifespans may also influence pricing, investment horizons, and the long-term affordability of benefits, making it essential for trustees to understand the impact on future cashflows.
Altman added: “For many years, life expectancy assumptions were built around a relatively steady pattern of improvement, but that narrative has been challenged in recent years by the pandemic.
“While headline mortality rates are beginning to normalise, there is now greater uncertainty around future improvements, with healthy life expectancy at its lowest level since records began in 2011, at around 60 years old for men and women.
“While health innovations could still support longevity gains, the outcomes are far less predictable than historic models suggest.”
