Apart from being a massive hit for Queen, this is a phrase that haunts Defined Benefit (DB) Trustees and Employers at each triennial valuation. Time after time the actuary comes to the table with the news the pension scheme members are expected to live longer, “It’s a Hard Life” for schemes “Under Pressure” of increasing liabilities.
As shown in the recent survey by PTL (click here to see the results), increasing longevity is currently seen as the second biggest risk to DB schemes.
So, what can Trustees and Employers do about this as “The Show Must Go On”,. Well, there are a few options available, such as Longevity swops, Buy-Out and Buy-In, but are they “The Miracle” we need?
These options do not come cheap as the insurer will need to factor in plenty of prudence in its pricing, but if the Trustee and Employer are able to handle the cost, they can then breathe a little easier at future valuations, with the longevity risk reduced or removed.
Still, it is not all doom and gloom! The latest statistics on longevity showed that whilst people are still living longer, the assumed rate of future increases to longevity has reduced. This has resulted in the odd outcome that many Trustees at recent valuations have been told that while longevity has increased the longevity liability cost has reduced.
Finally, we have a "win-win-win" situation; increased life expectancy is good for the members, reduced scheme liabilities is good for the Employer and actuaries are delighted to finally give some positive news 😊
To summarise, if your scheme members "Want to Live Forever" and you feel “You are Going Slightly Mad", you can "Break Free" by buying the insurance or realise that "These are the Days of our Lives" as we finally have a valuation factor going our way!