Steven Baxter, Longevity Expert at Club Vita, said: “The Financial Reporting Council (FRC) has called for a balanced and realistic view of the cost of pensions to companies – and rightly so. But by focusing its attention solely on investment risk, the FRC has missed one of the most important things affecting the present and future value of pension liabilities, and that is longevity risk.  If company accounts are to give a balanced and realistic view of pension liabilities, then companies must give longevity risk the right priority by first understanding the true impact of longevity on the balance sheet. 

“At the moment very little information is provided to investors about longevity risk.  The challenge facing finance directors is to equip themselves with the latest methods for measuring what longevity looks like now, and indeed, what it may look like tomorrow.

“We estimate that increases in life expectancy are costing a typical company five days of earnings every year.  For many companies the problem runs deeper still with accounts failing to reflect the latest information on how long we are living for.  A typical FTSE100 company’s balance sheet might be out by as much as £100 to £200 million”.