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Longevity improvements add to pension problems

Improved life expectancy has added £10bn to the pension deficits of FTSE 100 companies, says Aon Consulting.

Figures from the Government Actuary&#39s Department show the life expectancy of a 65-year-old man has increased by 10 per cent since its 2001 forecast, adding two years to average male life expectancy.

Aon says the new mortality calculations are also likely to affect the strength of life companies that offer annuities.

It predicts that pension costs will rise by 3.5 per cent, using the GAD&#39s latest figures and the FRS17 accounting rules, for every year of increased life expectancy.

Further longevity increases could see life offices coming under increased scrutiny from ratings agencies, says Aon.

Principal Paul McGlone says: “Advances in science and medicine have had a very positive effect on the number of people surviving into old age and companies now need to ensure they factor in ongoing longevity changes into their pension provision.”

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