Britain's pension deficits fall after statistics reveal we're not going to live as long as was previously thought

Oliver Gill
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Life expectancy is pivotal in the calculation of pension scheme deficits (Source: Getty)

The UK's pension deficits fell by £28bn during March after statistics revealed Britons won't living as long as previously expected.

Projections made by the Continuous Mortality Investigation (CMI) last week suggested that while people are still living longer, the improvements made were lower than previously expected.

Average life expectancy for men is 87.2 and women 89.1, for those turning 65 on 1 January 2017. This figures are a fall of 0.3 and 0.5 years respectively on the 2015 figures.

Read more: Combined deficit of defined benefit pension schemes drops to £500bn

As life expectancy figures are pivotal in actuarial calculations, the updated statistics have removed £28bn from scheme liabilities, according experts from Mercer.

The reduction in liabilities was matched by a growth in their valuation as a result of movements in bond yields, Mercer said. In aggregate deficits had fallen by £4bn as a result of asset growth.

Overall the UK's firms had a pension shortfall of £133bn, compared with a deficit of £54bn 12 months ago.

Mercer's figures cover 50 per cent of the UK's defined benefit pension schemes. Separate analysis by JLT Employee Benefits calculated the UK's aggregate position in deficit by £172bn.

JLT agreed updated life expectancy figures had a positive impact on shortfall.

Read more: Pension trustees criticised for focusing on mammoth deficits

"The latest mortality tables published by the independent experts at the CMI last week showed that we are not living quite as long as had been predicted a few years ago," said director Charles Cowling.

Indeed, what had been put down to a blip in mortality data caused by a hard winter and some bad flu experience now may be part of a longer-term trend. For the last two or three decades pension schemes have had to face escalating pension liabilities and deficits caused by ever increasing life expectancy.

"However, the peak in longevity improvements was more than 10 years ago and the last five or six years have seen very little improvement in longevity."

Meanwhile, Mercer's head of defined benefit Alan Baker said: "It is worth reflecting that the deficit is still well over double what it was at the end of March 2016 and historically speaking the pressure on pension schemes and sponsors remains a serious concern."

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