Just a fraction of liability growth since the start of the year will be offset by the impact of excess deaths caused by Covid-19, says Lane Clark & Peacock (LCP).
The consultancy said that, while liabilities had increased by £50bn since January due to falling markets and low interest rates, coronavirus deaths themselves will only cause a 10%, or £5bn, reduction.
Instead, defined benefit (DB) scheme funding is more likely to be impacted by the economic and social consequences of the pandemic, including a severe recession.
In its latest Longevity Report, published today, LCP said typical scheme liabilities would reduce by 0.25% as a direct result of Covid-19 this year, out of total liabilities in the region of £2trn.
The report also found the initial mortality rate at the start of the year was relatively low, but excess deaths to the end of May in England and Wales were around 60,000, or 11% higher than last year.
Head of trustee consulting Michelle Wright said: "The global impact of Covid-19 has been far reaching but it appears that so far it has been market movements that have had a far bigger impact on scheme funding than changes to longevity, although this could all change in the coming months and year."
LCP said longevity insurers and reinsurers are making little, if any, allowance for the pandemic in their longevity assumptions, and that longer-term issues, including technology and instant access to healthcare, would drive mortality trends in future and possibly boost life expectancy.
Partner Chris Tavener said: "The direct financial impact of pensioners' deaths in 2020 due to Covid-19 is relatively modest. It is not certain what the long-term impact will be with questions around whether there will be any second waves, if a vaccine is found, and how severe a recession will be.
"These factors, particularly the impact of a severe recession, could have far bigger consequences than the immediate impact of Covid-19 in 2020."
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