View more on these topics

Pension deficits could fall £310bn on life expectancy slowdown

Shifts in life expectancy could halve size of defined benefit deficits


The value of defined benefit pension deficits will be slashed in half if life expectancy increases continue to slow, according to a PwC analysis.

The consultancy says that DB deficits increased by £30bn to reach £530bn at the end of April.

However, it predicts that if latest life expectancy data showing a slowdown in rates of improvement continued, £310bn could be wiped off that figure.

If funds grew 1 per cent faster than current assumptions for the next 20 years, the deficits could be eradicated without companies contributing more cash.

Figures from the Continuous Mortality Investigation suggest that, for members aged 40 today, schemes would have typically projected a life expectancy of 90 and 91 respectively, but updating historic long-term improvement rates cuts this to 84 and 86.

For members aged 55, both male and female life expediencies are also revised down by four years apiece.

PwC global head of pensions Raj Mody says: “In the first decade of this century, there was a clear trend for improvements in life expectancy. Pension funds have typically been assuming this trend will continue when forecasting deficits. But over the last five years, that trend has changed and there is a growing view that it is not just a ‘blip’.

“Any given pension fund will have to think about how the national data affects their situation specifically – that will depend on the composition of their membership relative to the UK population generally. However, £310bn could be shaved off pension deficits if the latest life expectancy trends are assumed to continue and allowances for previous long-term improvements are removed.

“That then puts a fuller funding situation within reach for many pension funds, without relying on excessive cash contributions to repair deficits in the short term.”



QE has driven pension deficits up, think-tank argues

Quantitative easing has forced pension funds to put money in low-yielding government bonds, putting them at a significant risk from interest rate rises, the Centre for Policy Studies think-tank has argued. “Unconventional” monetary policy has driven bond yields down, but to meet guaranteed liabilities, defined benefit funds and life insurers have had to up their […]


Petition calls on Green to stump up £250m for BHS pension deficit

A petition calling on former BHS boss Philip Green to plug the collapsed retail giant’s £571m pension deficit will be delivered to his business group’s headquarters tomorrow. The petition has received more than 100,000 signatures, and will be taken to Arcadia’s head office by general secretary of the shopworkers’ trade union Usdaw John Hannett and […]


Woodford slams UK’s £1trn pension deficit

UK pension schemes should be increasing their allocation to equity income stocks rather than poorly performing bonds, according to Woodford Investment Management. Longer life expectancy and investment returns that are lower than anticipated contribute to the estimated £1trn liability shortfall in the country’s defined benefit schemes, head of investment communications Mitchell Fraser-Jones says in the […]

US election

Capital Market Notes, November 2016 David Lafferty, chief market strategist at Natixis Global Asset Management, looks at the impact on markets and portfolios since the somewhat surprising outcome of the US election. Click here

Planning now for the residence nil-rate band

Graeme Robb, senior technical manager at Prudential, writes about the residence nil-rate band and the advice opportunities it presents for you when tax year-end planning with your clients. On our Planning Matters hub, we considered a widow, Margaret, and a married couple, John and Anne, for whom the residence nil-rate band (RNRB) is influencing planning […]


News and expert analysis straight to your inbox

Sign up


There are 2 comments at the moment, we would love to hear your opinion too.

  1. Genius. If people don’t live as long and investment grow faster, the problem disappears. Who’d have thought?

  2. It’s not that people don’t live as long, it’s the implication if the rate of growth of life expectancy reduces.

    DB deficits are very subjective and a small change in assumptions can have a big impact on financials.

Leave a comment


Why register with Money Marketing ?

Providing trusted insight for professional advisers. Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and thought leadership.

News & analysis delivered directly to your inbox
Register today to receive our range of news alerts including daily and weekly briefings

Money Marketing Events
Be the first to hear about our industry leading conferences, awards, roundtables and more.

Research and insight
Take part in and see the results of Money Marketing's flagship investigations into industry trends.

Have your say
Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

Register now

Having problems?

Contact us on +44 (0)20 7292 3712

Lines are open Monday to Friday 9:00am -5.00pm