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Slowdown in life expectancy could ease £28 billion in pension pressure

Slowdown in life expectancy could see a reduction in the pension deficit by a massive £28 billion. A report by Mercer revealed that pension liabilities for FTSE 350 bosses was at £857 billion, but an 11% increase in mortality over the last winter could see that number drop.

Over 140,000 people aged over 65 died this winter, with a 21% increase in death from the flu. Although there is speculation that strain on the NHS is to blame, the UK mortalities aren’t noticeable worse than that of other European countries, according to Mercer. What has surprised experts, however, was how early the winter flu season began, which put the country at around twice the risk of coming down with serious influenza. Because of this, hospital admissions were seen to have reached a peak in mid-January, compared to 2016, which peaked in March.

Life expectancy projections saw a fast and large improvement within the first decade of the 21st century, but began to slow down again by 2013. Following the last year’s data, projections by the Continuous Mortality Investigation have reduced life expectancy for around 2% at the age of 65. The results bring to attention the company pension schemes, with Mercer believing that as the population is living longer and growing older, not enough is being done to guarantee that many workers will receive their full pensions after retirement.

“Longevity is a major risk that few schemes have addressed in any way,” said Andrew Ward, Partner, and UK Head of Risk Transfer at Mercer. “Some significant risks remain in a world where an extra year of life expectancy can add 5% to liabilities.

“As a minimum, all companies and trustees should seek to better understand the risk that longevity uncertainty poses to their financial health as well as the options available to remove this risk. This is particularly relevant as schemes develop their longer term plans either for a lower risk run-off or full buy-out.”