DB liabilities could drop by £90bn due to Covid-19 impact – XPS

Defined benefit (DB) pension scheme liabilities could drop by £90bn (5 per cent) due to the impact of the coronavirus pandemic on life expectancy, according to XPS Pensions Group.

The firm’s Covid Impact Analytics service forecasted “long-term vulnerabilities” in pension schemes following the pandemic, with XPS stating that some of its scenarios showed that the long-term economic impact of Covid-19 on life expectancy could be 50 per cent higher than the short-term impact of the pandemic.

The newly-launched service is the third and final facet in XPS’ Covid-19 response and allows pension schemes to be modelled against five different scenarios, ranging from minimal disruption to a global depression.

This firm’s pandemic response already includes the Covid-19 Tracker, which consolidates publicly available data on the pandemic in one place, and Scheme Vulnerability Analysis, which delves into the impact of the virus at an individual scheme level.

XPS said the Impact Analytics service considers the impact on a scheme’s investments alongside the change in liabilities so that trustees and sponsors can consider an integrated view of the full range of risks a scheme faces due to the pandemic.

XPS longevity analytics head, Dan Auton, added: “This new analysis cuts through the noise and presents a scheme-specific impact. It gives trustees and sponsors a much greater understanding of how their members and the scheme’s funding position may be impacted and, with the pandemic likely to continue into 2021, also maps the risks that look set to be a reality for some time to come.”

    Share Story:

Recent Stories


Managing volatility
In the latest Pensions Age podcast, Laura Blows speaks to Cambridge Associates head of European pension practice, Alex Koriath, about the Covid-related market volatility and how pension funds can prepare for the challenges ahead

De-risking options for pension schemes
In this latest Pensions Age podcast, Linklaters' Sarah Parkin talks to Laura Blows about the wide range of choice available to pensions schemes for the partial, or full, removal of their risks

Risk transfer opportunities
Laura Blows speaks to Lisa Purdy, Head of Fiduciary Distribution at Legal & General Investment Management and Gavin Smith, Pricing and Execution Director - UK PRT at Legal & General, about the impact of the recent market volatility on the bulk annuity and risk transfer market and the potential opportunities for the future

Bulk annuities during coronavirus
Laura Blows speaks to Just business development manager Prash Mehta about the impact of coronavirus on transactions