UK - Employers will be forced to close final salary schemes if new actuarial projections on mortality rates are correct, industry experts claim.
The warning follows a report by the Association of Consulting Actuaries to its members that current mortality tables are massively underestimated.
Marks & Spencer pensions manager John Peachy said that mortality rises would be enough to force the closure of many final salary schemes.
He explained that previous increases in longevity had come as a shock to employers.
And NAPF benefits director David Astley said he feared that increased longevity figures would lead to an increase in funding rates in DB schemes and a further reduction in annuity rates.
Sources who attended the ACA meeting, at which the new mortality figures were released, said that the organisation had warned that current estimates for longevity are wrong by up to 30% in some cases.
But some say that it is too early to verify these figures.
Hymans Robertson head of actuarial practice Ross Russell said the profession needed additional data from occupational schemes to evaluate the longevity issue properly.
The data – which is being compiled by the Continuous Mortality Investigation Bureau, the Faculty and Institute of Actuaries and the ACA – will only be complete in 2007.
Russell said: “It’s possible – as we are using data from insurance companies at the moment – that mortality will be higher and longevity figures will drop.”
Legal & General corporate annuities director Dennis Canham said that 60 to 75 year old males are showing the fastest increases in improvements in mortality.
“Much of these improvements are down to men stopping smoking. But these improvements have to stop at some time.”
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