LCP developed the technology in response to its experience that most pension schemes do not quantify their longevity risk in as sophisticated a way as their investment risks. LCP found that more schemes are now de-risking their investment strategies and longevity risk is increasingly dominating for those schemes.
LCP LifeAnalytics helps to fill this gap in pension schemes’ risk monitoring frameworks. It allows schemes to quantify the types of longevity risk they face and be confident they are making good risk reduction decisions across all the risks they are running.
Andy Smith, CEO of the £5bn Invensys Pension Scheme, said: “LCP LifeAnalytics provided us with a way of measuring longevity risk that for the first time allowed us to analyse all our risks together, combining our own investment risk analysis with the longevity risk analysis from LCP LifeAnalytics.”
The ICI Pension Fund uses the longevity risk output from LCP LifeAnalytics alongside LCP’s real-time funding and investment tool, LCP Visualise, as part of its risk management platform. This was important in assessing the value-for-money of the Fund's recent buy-ins.
Heath Mottram, CEO of the ICI Pension Fund, said: “LCP’s technology platform, combining LifeAnalytics and Visualise, uses leading-edge modelling of longevity risk to help us consider longevity and financial risks in an integrated way. It enables us to identify which de-risking actions offer the best value-for-money, including our recent buy-ins with Scottish Widows and Legal & General.”
Michelle Wright, one of the partners at LCP who led the development of LCP LifeAnalytics, said: “Considering longevity and investment risks in a consistent framework allows pension scheme trustees and sponsors to see more easily which de-risking actions offer them the best ‘bang for buck’. For example, if a scheme can afford £10m worth of de-risking, will they take more risk off the table by doing a buy-in, a longevity swap or selling some of their equities? Our technology can help clients answer these very practical types of questions.”
LCP LifeAnalytics was developed in conjunction with Richard Willets, Director of Longevity Analysis Ltd. He is a former chair of the CMI Projections Working Party and Executive Committee Member of the CMI.