2019 saw strongest improvement in mortality for eight years
LONDON (2 March 2020) – Aon, a leading global professional services firm providing a broad range of risk, retirement and health solutions, has said that it expects use of the latest model (CMI_2019) from the Continuous Mortality Investigation (CMI) to lead to a slight increase in liabilities compared to using the previous version of the model (CMI_2018). The new version of the model will still produce lower liabilities than earlier versions.
The newly released March 2020 update of the CMI’s mortality projections model, CMI_2019, incorporates deaths in the England & Wales population up to the end of 2019. Last year saw the strongest full-year mortality improvement since 2011, with the standardised measure of mortality being 3.8% lower in 2019 than 2018.
The new model shows that that projected male life expectancies from age 65 in 2020 increased by around three weeks (0.2%) and female life expectancies by around five weeks (0.4%). This is the first increase in projected life expectancy since 2014, when CMI_2014 was issued.
Matthew Fletcher, senior longevity consultant at Aon, said:
“Adding 2019 data to the CMI’s mortality projections model will increase projected life expectancies slightly – as a result we expect the overall impact on UK pension scheme liabilities compared to the previous model to be a small increase of less than 0.5%.
“Because the model is based on mortality in England & Wales as a whole, CMI make it clear that users should consider whether mortality improvements in the population they are valuing (e.g. a pension scheme) have been different to the wider population. There are two standard ways that actuaries use to allow for this, the ‘initial addition’ (A) parameter and the ‘period smoothing’ (Sκ) parameter. Changing A in CMI_2019 will have roughly the same impact as before but changing Sκ will have a very different impact.”
Matthew Fletcher continued:
“Pension scheme actuaries adjusting Sκ to set a valuation basis may need to reconsider whether retaining the same level of adjustment is still appropriate, because the liability impact of a given change in Sκ will be very different than with previous versions of the model – so retaining the same adjustment when updating the model may lead to a significant change in the level of prudence.”
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