Pension schemes and life insurers should be prepared for a modest change to their assumptions for mortality rates in the post-Covid-19 world, an academic study suggests.
Analysis of data from England and Wales to 12 May finds that deaths from the novel disease are largely, but not always, confined to those who tend to be less healthy than others in their age group. The result is that the years of life lost through early death are less than the average for each age group.
The research came as latest Continuous Mortality Investigation data revealed deaths in week 19 of 2020 (2 May to 8 May) were 1.4 times higher than in the same week of 2019, while death figures are 61,000 higher than expected since the start of the pandemic compared to 2019 mortality rates. However, it warned that death figures may be understated due to reduced data collection over the VE Day anniversary bank holiday weekend.
The academic paper - The Impact of Covid-19 on Future Higher-Age Mortality, written by Heriot-Watt University professor Andrew Cairns, Cass Business School professor and Pensions Institute director David Blake, Prudential Retirement head of longevity risk transfer Amy Kessler, and M Kessler Group chief executive Marsha Kessler - also concluded that many of those who have so far died during the pandemic "would have died anyway in the relatively near future". This is due to the presence of other life-shortening illnesses such as heart diseases, Alzheimer's, and diabetes.
Consequently, the academics estimated that there would be a "very modest" increase in life expectancy for survivors of around 0.2% at age 65, implying that "the impact of anti-selection on future life expectancies is negligible". This is based on mortality from the disease in England and Wales being between 75,000 and 85,000.
However, it did highlight that there was some evidence that lower socio-economic groups were 10-15% more likely to contract and die from Covid-19 than those in middle-ranking deprivation groups, largely as a result of a lesser ability to conform to social distancing measures due to working requirements.
Blake explained: "Once we control for regional differences in mortality rates, Covid-19 deaths in both the most and least deprived groups are proportional to the all-cause mortality of these groups. However, the groups in between have lower Covid-19 deaths compared with their all-cause mortality. The reason for this is not clear, although it might be because they were better able to adapt to lockdown and maintain more effective social distancing than the other groups."
The paper also predicted death rates will be low in 2021, "due to anti-selection", before gradually reverting to previously predicted mortality levels - but added indirect consequences of the pandemic could affect overall mortality trends.
These factors include long-term impairments that may arise from contracting but surviving the disease, delayed diagnoses on other medical issues, increased alcohol or drug intake during the lockdown, and "deaths of despair" from long-term economic fallout or increase job automation. However, changes to social and workplace behaviour or increased use of anti-ageing treatments could have a converse effect.
Kessler said: "This body of work is crucial for mortality modeling as the pandemic progresses and in its aftermath. The key finding that Covid-19 seems to increase each cohort's short-term mortality risk by a common multiplicative factor will help pension funds and insurers to properly assess liabilities now and in the future."
The paper will continue to be updated as further data becomes available.
Pensions consultancy Lane Clark and Peacock (LCP) has called out HM Revenue & Customs' (HMRC) tax policy on flexible drawdown as "unacceptable", claiming it could lead to draconian tax penalties during Covid-19.
30 years after the infamous Barber judgment, Tom Yorath looks at how the GMP equalisation problem has progressed against advances in technology
Volatile market conditions have led to a much wider range of pricing for pension scheme buy-ins and buyouts than has been seen for a decade, Aon says.
The £9bn Tyne & Wear Pension Fund and the £1.4bn Northumberland County Council Pension Fund are set to merge following a consultation by the government.
Legal & General has agreed two bulk annuity deals worth £116.2m with UK- and US-based IHS Markit schemes.