The company’s £26m defined benefit scheme, which has around 400 members, was predicted to have a deficit of £6.2m, based on actuarial calculations.

However, this figure was reduced by £700,000 to £5.5m following a medically underwritten mortality study, in which scheme members were contacted and assessed to give a full picture of their health.

The trustees of the Newcastle-based company’s pension were looking for the most accurate possible assessment of potential liabilities. They were concerned actuarial assumptions used in previous mortality calculations could result in the scheme being overfunded or underfunded.   

Advised by Punter Southall they commissioned medical underwriting specialist MorganAsh, which wrote to all scheme members and asked them to complete a medical questionnaire. Where further information was required, phone interviews with nurses were then conducted. Around 66% of scheme members co-operated with the study.

Ashley Wilton,chair of the JT Dove Pension Scheme Trustees,said: “In the past we’d found it difficult to reconcile some of the mortality assumptions used in the calculation of our liabilities with the actual experience in our pensioner population.

“We felt a medically underwritten approach, in which scheme members were actually asked for the facts about their health, would help us better determine our pensioner liabilities and, all-importantly, the funding needs of the scheme.”    

Andrew Gething,managing director of MorganAsh, said: “In our experience, applying traditional large-scale statistical mortality assumptions to relatively small pension schemes can provide a misleading picture of likely liabilities. By using an evidence-based approach, focused on real data, trustees and company managers are provided with what we believe to be a significantly more accurate forecast.

“This can affect company valuations and also funding and investment strategies for pension funds.”

Gerry Devenney, principal at Punter Southall, said: “Analysing data about the actual physical health and lifestyles of pension scheme members removed the need for unnecessary margins of prudence and allowed the trustees and sponsors to arrive at a more realistic estimate of their liabilities.”   

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Our clients say:

The MorganAsh process of contacting scheme members went very well. We received a good reduction from the insurers which enabled us to pursue a buy-in transaction, thus de-risking our scheme.

Howard Jones, director of Howie Group Limited and trustee of the Howie Group Limited Staff Retirement Benefits Plan