Increases in longevity are causing new headaches for retirement plan executives worldwide as longer lives mean longer obligations, said panelists speaking at a session on longevity risk at Pensions & Investments' Global Future of Retirement conference in New York on Tuesday.
New mortality tables presented by the Society of Actuaries show the life span of the average American male age 70 has risen to about 17 more years from 15.
The rise in life span is causing pension fund executives to put new emphasis on growth assets as well as to better diversify their portfolios in an attempt to optimize risk-adjusted returns said David Druley, managing director, head of global pension practice, at Cambridge Associates.
Mr. Druley said increased longevity also allows for longer investment horizons and greater investment in illiquid assets.
Another panel member, Olga Fuentes, the deputy chairwoman of regulation at the Superintendent of Pensions in Chile, said people at her system, which is a defined contribution plan, are discussing new mortality tables now to determine the long-term effect on plan participants.
William McCloskey, vice president, longevity reinsuance, at Prudential Financial, said the new mortality tables are helping cause a spike in risk transfers from pension funds to insurers in the U.K. He said the value of such transfers doubled to £12 billion ($18.7 billion) in the U.K. in 2014 from the previous year.
Mr. McCloskey said the U.S. is also an expected area of growth, as is the rest of Europe for risk transfers.
But Mr. Druley said plan risk transfers are still a small piece of invested assets, amounting to around $35 billion in 2014.