A new report warns of the harmful impact on pension plan liabilities that comes with underestimating life expectancy.
Swiss Re AG, Armonk, N.Y., addresses this issue in a report that examines what governments, pension plans, insurers and reinsurers can do to help address the challenges faced by societies as a result of increased life expectancy. The report also includes recommendations for key parties involved in addressing longevity funding issues.
The report observes that underestimating life expectancy by just one year can increase pension plan liabilities by up to 5%. A pension plan with $1 billion of liabilities would require an extra $50 million to be funded, notes Swiss Re, part of Swiss Reinsurance Company Ltd., Zurich.
Among the report’s recommendations:
–Employers and pension plan trustees should assess whether they are reserving for longevity at a suitable level and examine the feasibility of transferring some or all of the risk.