Falling rates of life expectancy could wipe as much as £310bn off the UK's £530bn defined benefit (DB) aggregate deficit, according to the latest figures from PwC's Skyval Index.
The combined DB pension fund deficit of UK companies grew £30bn last month to total £530bn, but the latest life expectancy analysis from the UK's Continuous Mortality Investigation now suggests people may not live as long as had previously been estimated.
Earlier assumptions had predicted a woman aged 40 today would, on average, live to 91, but the most recent analysis suggested they are now expected to live to 86.
PwC claims that, if the trend of slowing life improvement continues, the pension deficit could be reduced to £220bn as DB schemes will have to pay members for shorter periods of time.
"In the first decade of this century, there was a clear trend for improvements in life expectancy," said Raj Mody, PwC's global head of pensions.
"Pension funds have typically been assuming this trend will continue when forecasting deficits. But, over the last five years, that trend has changed and there is a growing view that it is not just a ‘blip'."
While the rapidly growing deficit of DB funds could be reduced by downward moves in life expectancy, PwC has calculated pension fund assets would still need to grow an extra 1% a year more than currently assumed to wipe off the remaining £220bn deficit.
MPs launched a major inquiry into the long-term viability of DB schemes 12 months ago. In a subsequent Green Paper on the issue, the government proposed changing the reference point for indexation for "stressed schemes" to reduce the burden on employers.
Mody said: "If pension schemes were previously assuming that a 40-year old man lives to 90, but that could end up being 84, you would look at current deficits in a different light.
"Companies and pension trustees should rethink their approach for how best to cover some very uncertain scenarios that are not going to become clearer for a few decades."
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