Cima issues pensions warning

The Chartered Institute of Management Accountants (Cima) has released a new report outlining the impact longevity risk can have on defined pension liabilities.

Entitled Apocalyptic demography: Putting longevity risk in perspective, the report aims to clarify the effects of mortality assumption changes on pensions by providing a checklist which can be used by those in senior finance jobs.

Chief executive at Cima Charles Tilley comments: "It is typically smaller to medium organisations that may not realise quite how seriously life expectancy assumptions can impact upon their balance sheets.

"The pensions regulator estimates that two years of extra life could add up to five per cent to a defined benefit pension liability."

Life expectancy in the UK is now double what it was 150 years ago, with an average gain rate of two to 2.5 years per decade.

Defined benefit pension schemes place the investment risk on companies using the scheme by guaranteeing specific post-retirement payments.

Cima recently signed a Memorandum of Understanding with the Chinese Institute of Certified Public Accountants to further develop accountancy jobs in the country.