Review of sessional research meeting on second international comparative study of mortality tables for pension fund retirees

Steve Haberman introduced the paper, which is an update to one published in 2006. He noted that its focus is on the key mortality assumptions adopted in corporate accounting disclosures. In particular, it does not seek to assess the bases employed for the funding of pension liabilities.

Terry Sithole then presented the main findings of the paper. Several different techniques are used, but perhaps the primary analytical tool consists of:

1. An assessment of the period life expectancy of 65-year-olds in various countries in Europe and certain other countries (ie without allowance for future improvements)
2. A similar figure that would be used for accounting disclosures for members of company pension schemes
3. The difference between the two, as (2) – (1).

In principle, we would expect to see positive values for item (3).

In practice, this was not always the case. Recent population mortality rates have been downloaded from the Human Mortality Database. Some countries have updated their pensioner tables since the 2006 paper, but others either have not done so, or were unwilling to release the information. It was noted that where the assumptions from the 2006 paper had to be re-used, countries showed pensioner populations that were shorter-lived than the general population, an intuitively unappealing result.

Gavin Jones was invited to open the discussion. He commented that, while there is much useful information in the paper and the accompanying document with full details by country, there is no reference to evolving actuarial practice. On the other hand, it is not easy to encapsulate what current actuarial practice is. He also noted the absence of references to the assumptions made regarding future improvements.

Several speakers from the floor drew attention to the number of countries where out-of-date assumptions had been retained. Consultants working in international pensions could have been used to remove some of the more implausible results noted above. There was also a request for a future update paper to address the split in calculated life expectancies between current mortality and assumed future improvements.

It was also noted that discussion of mortality rates for pensioner liability valuations appears to be more frequent in the UK than in other countries. This reflected the main conclusions of the paper, namely that there is a lack of consistency between countries in the treatment of mortality assumptions, and that the position has not improved since the 2006 paper.

In this regard, Brian Ridsdale drew attention to the work of the Mortality Working Group of the International Actuarial Association. This is encouraging the development of a comprehensive aggregation of mortality tables – population, life insurance and/or pension – as well as investigating what projection techniques are currently in use and other mortality-related issues.

Nigel Bodie

Credit-Suisse