Pension schemes wake up to longevity risk

PensionersPension schemes are becoming more aware of the effect of increasing life expectancy on their liabilities and are investigating instruments that can hedge longevity risk, according to delegates at a conference on longevity risk and capital solutions held in Frankfurt. Dr David Blake, director of the Pensions Institute at Cass Business School warned it is difficult for pension schemes to correctly predict the trend for increased life expectancy as “even official agencies have systematically underestimated previous mortality improvements”. However, he asserted that “capital markets are beginning to offer solutions for managing and unloading longevity risk”. Amy Kessler, a retirement expert at Pramerica‘s retirement division said regulation and accounting transparency have driven the UK to take a leading role in managing longevity risk, but said these innovations are now gaining favour in the US. ©2011 funds europe

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