“We come back to it because we don’t get it right,” he said, “and each time there is a row about changing it. It would be far better to have a formula to keep it under review, rather than just have to come back and have another row.”
Options for doing that might include a regular review of pension age by a standing commission or a formula that raised it gradually to keep the number of likely years of retirement, or proportion of life spent in retirement, broadly constant. …
“But something that links retirement ages to a formula around longevity would be sensible,” he said.
FT Schemexpert 01/11/10
I thoroughly agree. Consistency in the application of longevity factors is crucial to the social contract.
- It informs on the State Retirement Age
- It informs on our understanding of the costs of public sector pensions
- It informs on the multipliers for AA ad LTA calculations
- It informs on transfer value calculations
- It informs on SMPI projections for DC
Across the piece there is a need for a consistently applied set of factors that underpins our understanding of pensions whether we are the Treasury determining public spending and taxation, the DWP determining the welfare budget, Scheme Actuaries determining solvency or you and me determining how much to pay into our personal pensions.
I would go beyond Lord Hutton‘s immediate proposals and suggest that we have a series of key valuation factors for all the various forms of pensions we belong to. These factors would provide a benchmark , deviation from which would be justified by specific, clearly disclosed circumstances.