Longevity ranked second biggest risk to schemes

A survey - conducted by Aberdeen Asset Managers and the University of Edinburgh Business School as part of its Pensions Intelligence service - revealed longevity was rated as a higher concern to schemes than interest rate risk.

But although schemes are well aware of the challenges longevity risk presents they are still not implementing solutions - citing complexity, credit risk and cost as the main barriers, with buyouts being perceived as being particularly expensive.

The survey revealed 57pc of schemes believed life expectancy in the UK would continue to increase while 43pc of those surveyed thought members of their scheme would live longer than those in an average scheme.

Aberdeen Asset Managers client director Natalie Winter: said: "It is interesting that there is such a low take up of solutions to manage longevity risk, given it is a high concern. The market either needs to become more competitive or provide more appropriate

solutions."

Dr Alistair Byrne from the University of Edinburgh business school co-authored the report.

He said: "While pension funds are very concerned about longevity risk, they seem a little optimistic about the mortality calculations they use, suggesting they are underestimating future liabilities. This is a cause for concern, particularly given the low take-up of solutions to manage longevity risk."