STV slashes liabilities with bespoke mortality exercise

Broadcaster STV has shaved £5m from its projected scheme liabilities with an innovative mortality research exercise that reduced life expectancy assumptions by 1.2 years.

The exercise involved surveying members of the Caledonian Publishing Pension Scheme to build up a detailed picture of their state of health.

The firm then took this information to life companies to get impaired life annuity quotes and arrive at an accurate buyout value for the scheme.

The more precise data brought projected life expectancy for members retiring at 65 down to 15.5 years and helped cut the scheme’s deficit from £16.2m to £8.9m in the first half of this year.

KPMG pensions partner Donald Fleming (pictured) - who advised on the exercise - said: “Unless you can take this kind of information into account, you have to rely on proxies -  where members live and the size of their pot - which is very general information.”

He said it was important to get a handle on longevity as a two-year difference in life expectancy equated to approximately a 6% change in liabilities.

The scheme - which is closed to new members and future accrual - has some 600 deferred members and 700 pensioners with current liabilities of about £130m.

The firm achieved a 66% participation rate for the exercise, boosted by the incentive of a £50 supermarket voucher and a communications drive to explain the importance of the survey.

STV chief financial officer George Watt said the exercise - which took a year to complete – was part of ongoing efforts to reduce liabilities, and the scheme was now exploring buy-in options.

Fleming said this approach to longevity was groundbreaking and would be suitable for any company with material pension obligations where scheme trustees believed there was a disconnect between projected and experienced life expectancy.

“It’s a win-win situation,” he said. “The company is stronger because its liabilities are reduced, trustees improve their governance because they increase the accuracy of their data, and it doesn’t affect employee benefits.”