Pension Insurance, a wholly owned subsidiary of the Pension Corporation, has launched its new longevity insurance policy to protect defined benefit pension funds and their sponsors against the cost of pensioners living longer than expected.
Pension Insurance said that its longevity insurance policy will reimburse pension funds for the cost of any future pension payments that arise from pensioners living longer than expected. In return for this protection, pension funds will pay fixed annual premiums set at the inception of the policy. The policy will remain in force until the death of a pension fund’s last covered pensioner or their dependant.
It is estimated that an improvement in life expectancy by one year increases the liabilities of the average fund by more than 3.5%. Improving longevity means pensioners draw their benefits for longer and this increases pension fund liabilities.
John Fitzpatrick, a partner of Pension Corporation and director of Pension Insurance Corporation, said: We are confident our team’s extensive experience of developing insurance risk transfer products backed by a fully regulated insurance company will prove compelling to those pension funds and corporate sponsors. We look forward to working with trustees, advisers and sponsors on this truly ground-breaking protection to the pension industry.