DB Destination: Longevity Risk

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DB pension plans are unique in one aspect to pensioners: guaranteed payments for life of its members, and in many cases, their spouses. While valuable to the member, it exposes the plan sponsor to numerous risks. And unlike investment risk, pension plans are not compensated for retaining longevity risk.

Retirees are living longer than ever before, and that’s a good thing. But, many defined benefit pension plans do not fully appreciate the magnitude of longevity risk.

Recent developments and new analytical tools allow for much deeper exploration than was possible only a few years ago, and now is an ideal time for plans to re-examine their risk appetite and strategies. Continue reading to arm yourself with knowledge to better appreciate the risks and consider strategies to mitigate the risks.

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