The Continuous Mortality Investigation (CMI) has released its response to its consultation on the next version of its mortality projection model – confirming how it will respond to the high mortality rates in England and Wales over 2022.
The CMI - whose model is used by the majority of pension scheme trustees and sponsors in setting their funding and accounting assumptions - said it believed mortality in 2022 might be indicative of future mortality to some extent, unlike the exceptional mortality seen in 2020 and 2021 during the peak of the pandemic.
In its response to its consultation to CMI 2022, the CMI confirmed it will give 25% weight to the 2022 mortality data.
In the coming years, the CMI plans to increase the weight on mortality data for future years as a clearer indication of mortality trends emerges. The CMI also intends to update the model to use the latest population estimates based on the 2021 Census when available.
The changes reduce projected life expectancy relative to previous versions of the model.
Lane Clark & Peacock partner Chris Tavener commented on the results. He said: "Life expectancy assumptions at retirement age are likely to fall by around six months, equivalent to 2%, when adopting the new core model, all else being equal.
"As an indication of wider industry views, a large majority of the responses to the consultation view this fall to be reasonable. Among the small number who disagreed, responses were broadly evenly split between those who think the change is too high or too low."
Tavener: "We share the concern expressed by the CMI that higher death rates seen in the latter part of 2022, and continuing into the first quarter of 2023, 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."