Pension funds struggle to manage their longevity risks

by Artemis on July 28, 2010

Pension fund sponsors and trustees don’t appear to be managing the longevity risks associated with their schemes on their own says MetLife Assurance. Despite the fact that there are estimated to be £1trillion of defined benefit liabilities in existence MetLife says that longevity is not being managed properly.

MetLife have published their UK Pension Risk Behaviour Index 2010 which surveyed defined benefit pension scheme sponsors and trustees to gain a better understanding of how they viewed certain investment, liability and business risks. The survey then assessed how successfully they felt the risks were being managed.

According to the report, pension sponsors and trustees see longevity risks as the second most important risk they need to manage overall (and the most important for pension scheme sponsors). However the report suggests that they don’t feel they can manage this risk successfully with it coming 18th overall in terms of success. MetLife suggest that this indicates that companies may be struggling to keep the threat of increasing longevity under control which could be due to uncertainty of how longevity will extend or it could be over a lack of understanding of the risk management and transfer techniques available to hedge longevity risks.

Download and read the entire UK Pension Risk Behaviour Index 2010 from MetLife.

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