Attitude to longevity risk differs between U.S. and UK pension plans

by Artemis on December 8, 2010

Metlife has published a study undertaken by its U.S. and UK businesses which compare the current state of pension fund risk management and pension fund sponsor and trustee attitudes to risk between the U.S. and the UK.

As part of the study Metlife asked respondents to rank the most important risk factors that they felt affected their business today. Both U.S. and UK pension plans ranked Measure of Liabilities as their number one risk factor. That is not surprising as it is the risk factor that most pension schemes are grappling with today and the main reason they will reach out to risk transfer solutions to hedge the risks of their liabilities becoming unmanageable.

Surprisingly though, the UK ranked longevity as the second most important risk factor they face but the U.S. ranked it number 10. It is hugely important that pension plans get to grips with longevity risk as this is, possibly, the single biggest factor which could mean their liabilities outgrow their means to meet them. Both the U.S. and UK respondents ranked their perceived success at managing longevity risk as very low which shows that they are struggling to address this risk on their own.

It’s an interesting study although we do feel that perhaps U.S. respondents have been thinking of longevity when they refer to measuring and managing any underfunding of liabilities (as longevity is one of the biggest potential causes of underfunding).

You can download the report from Metlife here.

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