UK - Pension funds are turning to private healthcare to reduce the effect of ill-health retirement claims on their actuarial liabilities.
The initiative is being used by companies with low staff turnover and established pension schemes.
Healthcare consultant Private Healthcare Partnership said these firms were concerned that their actuaries were being particularly hard on the funding reserves required for ill-health retirement which was having a “significant effect” on their funding rates.
Managing director Jan Lawson said: “The employers who have adopted private healthcare are confident that it is helping them in their negotiations with their actuaries over costs.”
Hymans Robertson partner Ross Russell agreed that many clients were keen to find out what extra liabilities they would incur if an ill-health retirement arose.
He stressed that the nature of the problem would differ according to how generous an interpretation of ill-health early retirement was in the scheme’s rules.
But Punter Southall principal Joanne Livingstone was doubtful that the introduction of private healthcare would make much of a difference to a scheme’s liabilities.
“The idea that there is vast ill-health reserves which can be unlocked by a measure like this is dubious.
“If, in general, we are keeping people alive for longer then, if anything, it would be bad for the funding.”
She also denied that actuaries were being hard on ill-health pensions and pointed out that they were typically assuming a much heavier level of mortality than an insurance company.
The Pensions and Lifetime Savings Association (PLSA) has announced it will shrink its board by more than one-third as part of a governance overhaul to make it "agile and more appropriate".
Smaller FTSE 350 defined benefit (DB) schemes were nearly 15 percentage points less well-funded than larger schemes in 2017, according to a Goldman Sachs Asset Management (GSAM) analysis.
The advent of collective pension systems could help the UK avoid demographic challenges which will make it "impossible" for society to help savers in retirement, experts say.