In 2008, Hymans Robertson, the investment, pensions & benefits experts, asked a simple question: “Surely there has to be a better way for pension schemes to predict the life expectancy of their members?”
Well, there is and the result is Club Vita, Hymans Robertson’s sister company. It’s the only company dedicated to providing longevity services to occupational pension schemes in the UK. Our skilled teams of experts and statisticians are recognised throughout the industry and our analytical techniques are acknowledged to have broken new ground.
And even though we’ve only been operational for a relatively short time, we’ve already built up an impressive track record. We work with over 200 of the UK’s biggest pension schemes and their advisers, and our analysis helps control the longevity risk faced by funds totalling over £300 billion. That’s a lot of unmanaged risk that’s now being taken care of!
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Longevity is the biggest unmanaged risk your pension scheme faces, and we can provide you with everything you need to get it under control. We’ll help you understand the unique characteristics of your scheme and appreciate the consequences of how they’re likely to change over time.
No two pension schemes are alike, so if anyone tells you they can predict the longevity characteristics of your scheme by simply looking at your scheme members’ addresses, here’s a word of warning. Only by drilling right down into your data and analysing it at an individual level is it possible to discover the different types of demographic DNA that make up your scheme.That's how we provide you and your scheme actuary with longevity assumptions that are tailored to each member of your scheme.
And when you consider the financial consequences of getting your predictions wrong, even by a fraction of one percent, our services represent extraordinary value for money.
Our annual longevity monitoring service will keep you up-to-date with the longevity of your members, how many are living longer than expected, and how this impacts your funding position.
We’ll also show you how the profile of your scheme is likely to change in the future. After all, your future pensioners may have very different longevity characteristics to your current ones. Club Vita will keep you on track and help you make the right decisions.
There’s one further benefit to Club Vita: we will help you clean up your data. It’s a process that will tell you how reliable, historically accurate and complete your data is. For example, you’ll know if you’re paying pensions to deceased members.
Pension schemes join Club Vita for a variety of reasons. Here are a few of the many ways we have been able to transform how organisations and their schemes manage longevity.
Although Pennon is one of the largest FTSE 250 companies, their own pension scheme data wasn't rich enough to tailor their longevity assumptions precisely. Since they began working with Club Vita, they have been able to reduce their longevity assumptions by two years.Read case study
Thanks to Club Vita's more precise analytical tools and by basing their assumptions on their own scheme's data, Electrocomponents plc stand to reduce their funding liability by 5%.Read case study
The trustees of the Harmsworth Pension Scheme were concerned about over-reserving and under-funding, so they joined Club Vita. The precision offered by our unique longevity analysis gave them the reassurance they needed.Read case study
Even though Pennon is one of the largest FTSE 250 companies, their own pensioner population didn’t contain sufficient evidence to tailor their longevity assumptions precisely.
In 2008, they suspected that the “standard tables” they were using in their actuarial valuations might be overstating the liability, but they needed an objective approach to refine their assumptions one way or the other.
They also needed to keep a close eye on their pension costs as these were under close scrutiny from shareholders, regulators (as a water utility) and City analysts. Longevity was one of the key drivers of those costs.
They joined Club Vita and by moving to individual assumptions which were tailored to each member, they were able to reveal the true diversity of their membership and capture the differences between their pensioner population and their current workforce. The analysis showed life expectancies were almost two years shorter than they had previously been assuming, bringing a material reduction in the balance sheet liabilities under IAS19 / FRS17 reporting.
"Having solid information and comparison to a much wider database is critical for us to be able to make well informed decisions in relation to longevity."
One of the milestones for us at Club Vita has been to see pension schemes directly applying the analytics we have produced. Subscribers undertaking valuations are now using VitaCurves (longevity assumptions tailored to each member of their scheme) – rather than standard mortality tables – as the basis for the longevity assumptions.
We asked Colm Deasy, then Group Pensions Manager of Electrocomponents plc, a FTSE 250 electronic components distributor, what they had found:
"We had a valuation due in 2010, so our primary focus was to understand what the impact of adopting VitaCurves was likely to be. The trustees recognised that their existing longevity assumption was a standard life office table and was not tailored to the membership of the scheme. This was adopted at the 2007 valuation because there was too much uncertainty about our scheme’s own experience to be able to tailor the assumption in a meaningful way.
The trustees signed up to Club Vita to get greater certainty of the scheme’s liability. Club Vita allows the trustees and their scheme actuary to tailor the longevity assumption in a way that was simply not possible before. Greater certainty is paramount to the trustee.
The report from Club Vita showed that moving from the current assumption to VitaCurves could reduce the funding liability by over 5%. So in our case, as well as providing greater certainty for the trustee, it was good news for the company too."
Given the risks associated with longevity, pensions managers and trustees have to have access to clear and up–to-date evidence on longevity and receive early warnings of any relevant trends.
As a member of Club Vita, DMGT have been able to tailor their longevity assumptions to reflect the true mix of individuals within their scheme. The additional precision has given the trustees comfort that they were not under-reserving, and reassured the company that they were not being asked to overfund the scheme.
The clear and easy-to-understand reports they received have provided DMGT with in-depth analysis that covers new ground. They particularly like the way it is clearly aimed at trustees and companies, rather than longevity experts.
As schemes look to de-risk it is important that an accurate assessment is made on each risk carried by the scheme, this includes the longevity risk with any analysis preferably based upon their own membership data. The annual monitoring provides the basis for an objective method of achieving this and improves the accuracy of this assessment. Only then can trustees and companies correctly measure the efficiency of any de-risking strategy such as longevity swaps and buy-ins.