On August 1st the actuaries› trade body adopted a new set of mortality tables drawing on data collected between 1999 and 2002, It forecasts yet another increase in life expectancy. In 1999 actuaries assumed that a British man retiring at 60 would on average live to the ripe old age of 84. They then raised that estimate in 2002 to 87. Now they figure he will live about six months longer.
What is good news for ageing folk is bad news for those who support them. Each increase in life expectancy of one year adds about £12 billion to the aggregate pension liabilities of FTSE 100 companies, says Peter Tompkins of PricewaterhouseCoopers, an accounting firm. To make matters worse, many pension schemes have yet to catch up with previous adjustments to mortality tables.
So it is not surprising that many companies are trying to reduce the risks of providing pensions by closing their final-salary schemes to new members (which three-quarters of FTSE 100 firms have already done) and, increasingly, to existing members. For example, Debenhams, a department store, said this week that members of its scheme would stop accruing benefits at the end of October. By 2012, reckons Mr Scott, more than half the plans provided by Britain’s biggest firms will be closed to existing members.
Company pensions | Running to stand still | Economist.com