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Longer lives hitting pension funding
15 August 2008 12:00
Rising life expectancy is one of the major reasons that some of the world's largest firms are showing a deficit in their pension schemes, a partnership of actuaries has claimed.
According to recent figures from Lane Clark & Peacock (LCP), the collective £12 billion surplus that the FTSE 100 firms held in their UK pension funds in July 2007 is now a £41 billion shortfall - the biggest swing that it has recorded for the past five years.
Adam Poulson, a partner in LCP, has now stated that apart from the instable nature of investments, the biggest factor in this dip has been growing longevity, with even a one-year increase in average life expectancy resulting in a three per cent rise in fund liabilities.
Yet he asserted that the majority of the FTSE 100 companies do not provide any information on their longevity assumptions and called on them to become more transparent, consistent and sophisticated in setting these important estimates.
The threat to workplace pensions was also underlined by latest data from the Pension Protection Fund, indicating that the UK's 7,800 defined benefit schemes had a deficit of £24.1 billion last month, compared to a surplus of £83.3 billion a year previously.
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