Let’s say you’re saving for retirement and you plan to live to the ripe old age of 85.  You save accordingly by socking away a certain amount every year and banking on the market to provide you with a tail wind to help you built just the right sized nest egg.  To your delight, your portfolio seems to be beating the S&P 500 year after year.  Way to go, fella!

Then one day, magician David Copperfield announces that his quest for the fountain of youth has finally yielded some results.  He has scientific evidence that the stream running through his Bahamian plantation will allow anyone on Earth life to the age of 100.

“Damn that Copperfield!” you exclaim.  Now you have to save a lot more for retirement than you had planned.  All of a sudden, beating the S&P 500 ain’t looking so hot anymore, eh?  You’re now on the hook to support yourself for an extra 15 years.

Pension plans face this problem all the time.  In fact, a scan of FTSE 100 companies this week reveals that 10% of them had to raise their expectations of longevity this year alone – significantly increasing their future liabilities.

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