LONDON, UK – Even pensions professionals are still under-estimating the effect of increased longevity on their pension schemes, says Hewitt Associates, a global human resources consulting and outsourcing company. When over 300 delegates at pensions conferences during the autumn were invited by Hewitt to take part in a game to estimate the life expectancy of various groups of people with different socio-economic characteristics, they undershot the current projected best estimates of life expectancy by around five years – equating to around £150 billion of liabilities for UK pensions.

In the Hewitt Longevity game the conference delegates were given information on some of the key factors that impact life expectancy such as individual health, wealth and lifestyle factors, together with information about pension size, address and employment profile.

Martin Bird, head of Longevity & Risk Transfer Solutions at Hewitt said:

"Despite considerable publicity on the subject and huge steps forward in the way in which pension schemes are assessing member life expectancy, it was surprising that delegates could still underestimate the implications of increasing life expectancy by such a margin. Although pension scheme longevity assumptions have increased significantly over recent years to reflect continued improvements in life expectancy, there still appears to be a significant knowledge gap when it comes to understanding just how long people are expected to live. The financial implications – potentially £150 billion across the UK's pension schemes - speak for themselves.

"It brings into sharp focus the need to understand the latest thinking in relation to assessing life expectancy. The Hewitt Longevity Model, upon which the conference game was based, enables schemes to drill down to the characteristics of the individual members of a pension scheme and to set appropriate longevity assumptions from a position of much greater understanding."

Solutions to the issues for pension schemes which are prompted by increasing life spans, such as longevity swaps, are continuing to gain interest in the UK market.  2009 saw the first of these deals and 2010 is expected to bring more.

Martin Bird continued:

"Irrespective of whether schemes and sponsors wish to remove some or all of their exposure to longevity risk, there is a huge amount of information that is available from the longevity swap market and we are starting to see the emergence of a market price for longevity.  Together with a more informed view of the way in which life expectancy varies within a given pension scheme, schemes can be better placed to manage the risks associated with continued increases in longevity."

"We expect to see a number of longevity swap transactions coming to market during 2010, along with a resurgence in the level of buy-in activity as schemes continue to focus on understanding all risks, and decide which to retain and which to remove."

Last year, Hewitt warned against the potential £26 billion longevity gap that sponsors risk sleepwalking into in relation to the assumptions to be used for 2009 year end accounting purposes.  The additional amount relates to the different assumptions used by companies and trustees in predicting the life expectancy of the members of UK's largest defined benefit pension funds.  On average, FTSE 100 companies currently assume life expectancy for a 60 year old male of around 86 years in their annual accounts. In contrast, trustees of the same schemes are predicting life expectancy of around 88 years.

About Hewitt Associates
Hewitt Associates(NYSE: HEW) provides leading organisations around the world with expert human resources consulting and outsourcing solutions to help them anticipate and solve their most complex benefits, talent, and related financial challenges. Hewitt works with companies to design, implement, communicate, and administer a wide range of human resources, retirement, investment management, health care, compensation, and talent management strategies. With a history of exceptional client service since 1940, Hewitt has offices in more than 30 countries and employs approximately 23,000 associates who are helping make the world a better place to work. For more information, please visitwww.hewitt.com

Other Contacts
Anna Mitchell, Capital MS&L, 020 7307 5346 oranna.mitchell@capitalmsl.com
Supriya Mathur, Capital MS&L, 020 7307 5347 orsupriya.mathur@capitalmsl.com