The £26m JT Dove Pension Scheme has reduced its forecast deficit by 11 per cent following a medically underwritten mortality study.
Using more accurate assumptions on longevity has been touted as an effective strategy for reducing scheme deficits.
The Mums was conducted following the scheme’s latest actuarial valuation in June 2016. Having expected a deficit of £6.2m, this figure was revised down to £5.5m after the study.
The scheme, comprised of around 400 members, had approximately 66 per cent of scheme members participate in the study.
Could Mums increase your liabilities?
While this scheme has successfully brought down its liabilities with a Mums, using the study could have the reverse effect of widening a deficit with increased liabilities.
Aled Edwards, principal consultant and actuary at Quantum Advisory, said there is a risk for the employer that the results of a mortality study could reveal the scheme members are healthier than average.
“There is however a counter-argument that, even where the mortality study reveals the scheme members to be above average health, it would still be possible to agree to a lower level of technical provisions due to the removal of some uncertainty,” he added.
The benefits of Mums can go beyond reductions in scheme liabilities, according to Edwards. They can be used for company accounting valuations under IAS 19 and FRS 102 accounting standards.
“The Johnston Press pension scheme reduced its accounting deficit by £50m in 2016 following a Mums exercise, and this coincided with a 13 per cent increase in the employer’s share price”, he said.
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