There was some research done earlier this year by the Association of British Insurers (ABI) which examined the likelihood of defined benefit pension schemes going bust. Based on a hypothetical defined benefit scheme that matches the typical real life scheme they concluded that an increase in longevity of five years could make it almost twice as likely to fold – although that’s only a movement from 3% to about 6%. Defined benefit schemes are going out of fashion pretty quickly anyway – in 2000 there were 18,350 private sector defined benefit schemes but in 2006 there were just 3,470. Over the same period the number of people in these schemes went from 4.1m to 1.6m.
There’s a PDF available to download on the ABI site if you want the full report titled Coping with uncertainty and the importance of the sponsor’s covenant.