Pension schemes can learn from occupational health data.


It’s long been known that the best way of valuing the pension liabilities of the employees of a company is to look at historical data of previous generations as a starting point. The class of 2004, 1994 or even 1954 can teach us something about the class (or cohort as actuaries call them) of people in 2014.

The trouble is you need very large samples to make judgements. Small groups can produce data that is unreliable”skewed” by some freakish accident unique to a certain group that may have no relevance to today’s workforce.

Actuaries are always looking for more reliable data sources that can allow them to take specific views on employee groups without being a prey to these freakish anomalies (again there is an actuarial word – “anomalies”).

One such source of data, which has gone largely ignored, is an employer’s own history of occupational health in its workforce. We all know that certain industries will have particular health problems- Coal Miners and those working with Asbestos are notorious examples, but there are, it seems trends that can be observed in less obviously “health-stressful” occupations that can deliver interesting trends in the mortality (rate of death) and morbidity (rate of sickness) in staff.

What is interesting to actuaries is that these statistics appear to be consistent over time and taken year after year (longitudinally), can provide trends which can be used to value the liabilities a pension scheme has , to pay pensions to those in retirement or in long-term ill health.

That pension actuaries and the actuaries who examine the health trends of those at work, have not previously worked together, may be no more than an accident. There are in actuarial circles, the same silos as appear in any profession and actuaries who work in pensions do not tend to talk as much to those who work in general insurance and specifically occupational health insurance.

But it is likely that those who hold “big data” on occupational health, will want to capitalise on this information and feed the knowledge this brings to their pension colleagues- if only because data is now so malleable that it can be interpreted and applies across functions in a much more easy way.

What’s more , the data tends to be accurate and complete. Companies are required to hold detailed records on sickness at work, absence from work and the reasons for it over considerable periods of time.

So expect to see more interaction and co-operation between those who manage the risks of occupational ill-health and the various records that they keep and those who manage the liabilities of occupational pension funds.

While the very largest pension schemes may be able to analyse their own pensions data and use it as a starting point to work out what to put away to meet future obligations, smaller companies may increasingly resort to their experience of occupational health and the experience of other organisations like them, to get a feel for their and their worker’s long-term futures.

About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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