The CMI has issued its consultation to help shape the next version of its mortality projection model, which is used by the majority of pension scheme trustees and sponsors in setting their funding and accounting assumptions. The consultation focuses on how to respond to the very high mortality rates seen in England & Wales over 2022, to which the model is calibrated.
The CMI believe mortality in 2022 may be indicative of future mortality to some extent, unlike the exceptional mortality seen in 2020 and 2021 during the peak of the pandemic.
The key proposal is to give 25% weight to the 2022 mortality data. In the coming years, the CMI plan to steadily increase the weight on mortality data until around 2025, by which time it expects a clearer indication of mortality trends of the future. The CMI also intend to update the model to use the latest population estimates based on the 2021 Census.
Both of these changes reduce projected life expectancy relative to previous versions of the model.
Chris Tavener, Partner and Head of Life Analytics commented: “If these proposals go ahead then life expectancy assumptions at age 65 are likely to fall by around 6 months, equivalent to 2%, when adopting the new core model, all else being equal. This is a larger fall in life expectancies compared to recent model updates, but we share the concern expressed by the CMI that higher death rates seen in the latter part of 2022, and continuing into January, may be indicative of future mortality.
“We are seeing an increasing number of pension scheme trustees and sponsors look to us to understand how their own members are likely to be affected by the various factors driving recent higher death rates, such as the ramifications of the pandemic and pressures on the healthcare system, which in our view will affect some groups more than others.”
Publication Date: 1 Feb 2023
Publication Site: Lane Clark & Peacock