A new study suggests that retirees may have a life expectancy six to seven months lower than before the Coronavirus pandemic.
The Continuous Mortality Investigation (CMI), a mortality tool of the UK actuarial profession, has released the figures in this year’s iteration of its annual mortality improvement projection model.
The CMI includes data from 2022 for the first time but places a 25% weighting on the data.
Data analysts WTW, who analysed the figures, predicted that if the latest mortality data had included 100% of the new data the reduction in life expectancy could have been more like 11 months.
The CMI’s model is widely used by defined benefit pension schemes when making assumptions about how mortality rates will change in future. It is used to forecast how long pension scheme members will live.
WTW data suggests the 2022 mortality tables imply the lowest life expectancy for pension scheme members since 2009 and that life expectancy has dropped by about two years since 2012.
The new CMI forecasts cut life expectancy at 65 by around seven months for men and six months for women, compared with the outputs from last year’s version.
The changes mean that the new CMI 2022 projection model for commonly used base mortality tables gives a life expectancy at age 65 of 21.55 years for a man (down from 22.15 in the 2021 model) and 24.03 years for a woman (down from 24.56 in the 2021 model).
WTW says that the figures suggest mortality in the UK has been elevated during the pandemic and has not yet returned to pre-pandemic levels.
Stephen Caine, senior mortality consultant at WTW, said: “Covid sadly remains responsible for hundreds of deaths each week, but there have been a similar number of above-average deaths from non-Covid causes for a variety of reasons, particularly over the last 12 months.
“Age-standardised mortality rates in 2022 were 6% higher than in 2019 and the CMI estimates that there have already been 25,000 more deaths this year than would have been expected if mortality rates had been in line with pre-pandemic levels in 2019 (year to 9 June).
“After treating 2020 and 2021 as exceptional, the CMI has concluded that last year’s heavy mortality is more relevant to what we might see in future for pension scheme members, but has not placed full reliance on it. If it had fully incorporated the 2022 data, life expectancies at 65 would have reduced by around 11 months compared with last year’s model. The decision to apply a 25% weight means that the CMI believes 2022 experience doesn’t yet reflect a new normal and instead expects the reduction in lifespan for pension scheme members from recent trends to be more modest.
He added: “This continues a trend seen since over the last decade, where stalling longevity improvements in the UK from a variety of causes have seen pension scheme member life expectancy drop by around two years in total relative to the 2012 model. This has been accentuated by the 2021 census which revealed fewer people than expected in many age groups, implying mortality rates had actually been higher than expected over the past decade – a step change which is incorporated in the CMI_2022 model and accounts for one month of the life expectancy drop alone. Overall, CMI_2022 gives the lowest projected lifespans since the first version of the model was developed in 2009.”
Mr Caine said that the new mortality tables may cause DB pension schemes to review their life expectancy assumptions. Lower life expectancy could reduce DB pension scheme liabilities by £20bn or more. It could also affect transfer values and commutation.
