comparethemarsbar.com

If life expectancy was measured on the mars bar scale, Kensington and Chelsea would be “fun size” and certain areas of Scotland would be “deep fried”.I assume pension buyout specialists Pension Corporation use a more sophisticated method of measurement. I read with interest their press release yesterday which stated that pension schemes with Scottish members may be over-estimating life expectancy and therefore actual pension liabilities may be lower than currently estimated. If the life expectancy for such schemes are measured using unadjusted UK averages, then I agree that an overstatement of liabilities is likely.

I have always believed that life expectancy comes from socio-economic group rather than geography. This tells me that, unfortunately, Scotland has many more places of lower socio-economic grouping than the UK average . But it does not tell me that being Scottish in itself affects life expectancy to a great extent. Many postal districts in Scotland will have life expectancy which are comparable with other UK areas.

The advice from Pension Corporation is that schemes should look at life expectancy in detail and there are many tools available to help trustees and scheme sponsors alike. It is easier than ever, especially for smaller schemes, to get a handle on scheme specific life expectancy estimates using postcode analysis

In my experience, there has been a concerted effort in the actuarial profession over recent years to allow for variation in mortality expectations at a scheme level and so I am not convinced that Scottish schemes are over-reserving for pension liabilities. But as Scheme Actuary and advisor to a number of Scottish based pension schemes, if an insurer wants to charge less than I think to secure liabilities, who am I to argue?

I look forward to debating this issue further at the Pension Corporation conference in Edinburgh later this week.