A 21st Century approach to setting pension-scheme mortality bases

December 14th 2006 saw the launch of a new software service for pension schemes which are too small to have credible experience data for setting a mortality basis. This is a separate service to Longevitas, which is primarily for pension schemes and annuity portfolios with significant volumes of experience data.

After gender, socio-economic group or lifestyle is the most important variable in determining current life expectancy, and therefore annuity cost (Source: Richards and Jones, "Financial aspects of longevity risk", SIAS 2004). Traditional actuarial techniques have used pension size as a proxy for socio-economic differentials. The service at mortalityrating.com uses a far more powerful rating system based on each pensioner's postcode. By uploading a very simple extract file of anonymised member details, a pension scheme can have a basis recommendation based on the risk-management techniques used by large life offices.

The mortalityrating.com service is currently available under a yearly licence. In early 2007 it will be available on a one-off basis without licence commitments for occasional users.

STOP PRESS: Pension Protection Fund to use mortality rating software. Please see the press release.