According to Reuters, the report noted that longer life spans could add up to 15% to the current estimated pension liabilities of defined benefit pension schemes. European companies, especially in the UK, recognize longevity risk more so than their counterparts in other parts of the world, Hewitt found.
UK plans typically assume five to six years additional lifespan compared with other countries the report said, according to Reuters. In the UK they say longevity improves by about three to four months each year.
In addition, Hewitt found companies tend to overlook their pension schemes’ exposure to currency risk which could increase their deficit further, by up to 30%. More than one-third of companies ranked currency as the lowest pension risk exposure, although many of them have established mechanisms to deal with currency risk in their company results.
Hewitt’s report was based on its summer 2008 survey of 171 plan sponsors in 12 countries (see Canadian Sponsors Still Underprotected on DB Risks ).