Aon Hewitt has announced the Canadian launch of a new tool designed to help DB plan sponsors more effectively understand longevity.
The Aon Hewitt Longevity Model uses location-based data to help Canadian pension plan sponsors develop a comprehensive, in-depth understanding of the likely life expectancies of plan participants, as well as the risks associated with those assumptions.
The company is the first consulting firm in Canada to offer a tool to help plan sponsors understand the life expectancy of pension recipients through location-based data, which it says has shown to be one of the most reliable predictors of relative life expectancy.
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Canadian life expectancy at age 65 has increased by about five years since the early 1970s, or a rate of more than a year a decade. As expectations for life expectancies rise, so do pension plan liabilities. A one-year increase in life expectancy at age 65 increase liabilities by approximately 3%.
As well as allowing sponsors to set a realistic baseline longevity assumption, the model also provides a deep statistical understanding of longevity risk.
“For plan sponsors, longevity risk assessment should be an important step in all risk strategy discussions,” says Tom Ault, Aon Hewitt risk settlement group leader, Canada. “The Canadian Model will be critical to those plans considering the complete settlement of liabilities, as well as those that are looking to insure against longevity risk or those that simply want to establish better long-term risk parameters.”
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