Pension and Life companies will now be able to take into account the social class and marital status of their scheme members when calculating potential liabilities thanks to the launch of Longevity Risk Segments (LRS), a new risk assessment tool by Experian, the global information Solutions Company, and Richards Consulting, a specialist in analysing longevity risk.
Experian's research reveals that life expectancy can differ by as much as five years depending on the social class of the individual. Added to this, the life expectancy of 65 year olds has increased dramatically over the last ten years and is expected to continue growing. Currently, 65 year old males from the most affluent social group live an average of 20 years while affluent women live almost 23 years and this figure is increasing by two years every decade.
Longevity Risk Segments (LRS) will enable companies to provide a far more accurate assessment of longevity risk than is currently available from using existing methods such as analysing age, gender and pension size. LRS analyses the population by seven Mortality Groups based on social class using a comprehensive range of data variables including demographic, lifestyle and socio-economic characteristics.
LRS also takes into account marital status to provide a more accurate assessment of overall pension liabilities. As most pension schemes provide spouse benefits, the presence of a spouse can add around 12 per cent to the total cost of providing pension benefits.
Stephen Richards for Richards Consulting commented: “Socio-economic group is the most important rating factor for longevity after age and gender. This new data product allows companies to profile their pension liabilities and gain a better understanding of where their risks are concentrated.”
LRS will be essential for pension schemes in the preparation of funding statements and any company that has to provide scheme disclosures under FRS17, IAS19 or IFRS accounting principles. It will also prove invaluable to life insurers and pension and annuity providers.
The launch of LRS is a further demonstration of Experian's intent to focus on the pensions sector and to develop tools to assist actuaries and trustees more accurately determine future liabilities as well as improve communication channels. Other services of specific relevance to the industry include Existence Verifier for discreet and fast mortality screening and Autotrace to assist locate those active and deferred pensioners that have moved. |
