According To 2015 Data From The Society Of Actuaries, As Longevity Has Improved, U.S. Pension Plan Sponsors Have Seen Corresponding Increases In Their Liabilities. For Example, As A 70-year-old Male's Longer Life Expectancy Is Periodically Recognized In Mortality Tables, The Associated Liabilities Increase Significantly, With A 6.6% Increase Associated With The Most Recent Updates In 2014 And 2015. (Photo: Business Wire)
The dramatic rise in life expectancy has improved human well-being but future longevity uncertainty also poses a real challenge to pension funding levels that plan sponsors will need to proactively manage, PGIM said today in a new report. PGIM, among the world's top 10 asset managers with more than $1 trillion in assets under management, is the global investment management businesses of Prudential Financial, Inc. (NYSE:PRU). This Smart News Release features multimedia. View the full release here: http://www.businesswire.com/news/home/20161116005539/en/
According to 2015 data from the Society of Actuaries, as longevity has improved, U.S. pension plan sponsors have seen corresponding increases in their liabilities. For example, as a 70-year-old male's longer life expectancy is periodically recognized in mortality tables, the associated liabilities increase significantly, with a 6.6% increase associated with the most recent updates in 2014 and 2015. (Photo: Business Wire)
The report, Longevity and Liabilities: Bridging the Gap, highlights that longevity risk has often taken a backseat to investment and interest rate risk. The underestimation of human life spans by forecasters and the potentially sharp unanticipated increases in longevity resulting from medical breakthroughs, such as anti-aging genetic treatments, poses a real risk to pension funding levels. This risk is compounded by the "lower for longer" interest rate environment that has burdened plan sponsors with low discount rates. "We have had a century of underestimating actual longevity experience," said Taimur Hyat, PGIM's chief strategy officer. "These annual forecasting errors can compound over time to be quite significant. Understanding, quantifying the true magnitude and responding to the challenge of longevity risk is an important step for plan sponsors."