The past 12 months have seen significant developments that are likely to shape mortality models among defined benefit pensions scheme managers and sponsors alike, and possibly even have an impact on the pricing of de-risking deals.
The updated Continuous Mortality Investigation (CMI) model (CMI_2024) showed an improvement in longevity overall in the year to January but also revealed a bifurcation of life expectancies between young people of working age and those over 65 in England and Wales.
A new approach to factoring the continued impact of Covid-19 on life expectancy was also built into last year’s update, seeking to provide a clearer picture of the disease’s future impact on life expectancy.
And the use of GLP-1 receptor agonist weight-loss medications grew, which has the potential to skew mortality experiences and therefore redraw pricing regimes.
CMI_2024 was published in the summer, departing substantially from its previous iterations to allow for a more granular breakdown of mortality by age groups.
The CMI model, updated annually since its introduction in 2009, underpins the life expectancy models that defined benefit (DB) pension schemes build to calculate their funding positions into the future. Sponsors use them to calculate their schemes’ financial positions on their balance sheet, and they are also factored into valuation frameworks for insurers as well as pricing models for annuities and protection products. Participants will use them as the basis for their own models, which they tweak with their own observed mortality experience data.
The overall mortality rates showed by CMI_2024 are 4% lower than in 2023, the lowest on record.
But the rosy picture is not an even one. Life expectancy among the over 65 cohort increased by three months for men and by two weeks for women but shortened by about five months for men and women aged around 35.
“For the working-age population, you’ve got trends pushing in opposite directions, essentially,” said Stuart McDonald, Partner at Lane Clark & Peacock.
“It is worth being aware, though, that life expectancy calculations depend on not just the age someone is today, but all the ages they’re going to be through the remainder of their lifetime.”
Whether these changes are reflected in pricing for pension risk transfer (PRT) deals depends on a host of factors. Transaction prices tend to fall if insurers think people will die younger because it would mean fewer of the fixed benefit payouts will be issued to scheme members.
WTW estimates that liabilities might increase slightly among schemes that adopt the CMI_2024.
But experts point to market influences, such as scheme funding levels, as being greater determinants of price, especially when the longevity risk is pulling in different directions across age groups.
“In practice, the impact of working age mortality data on pricing deferred members in UK PRT transactions is very small,” said Ashley Campbell, Director of Actuarial at Crystallise.
“Even for deferred lives, the value of the liability is driven overwhelmingly by mortality assumptions at older ages because that is where the future cashflows, and therefore the risk, actually sits.”
According to analysis by Barnett Waddingham, external factors such as accidental deaths – including from traffic incidents and drugs overdose – as well as suicide, were the leading causes of deaths that suppressed life expectancy among younger workers. While cancer and other illnesses were the principal killers among older cohorts, improvements in treatment meant that their impact has lessened over time.
Commentators have said the significance of the decline in younger people can’t yet be properly assessed until full annual datasets are available. Also, declining performance within the UK’s public health service makes statistical conclusions difficult to reach.
“Delays accessing emergency care have a bigger impact on younger age groups than they do on older age groups, in relative terms… because death rates are ordinarily low for younger age groups,” said McDonald.
“So, the additional risk arising from the delay is quite large relative to baseline mortality risk for a young working age adult, but it’s smaller relative to baseline risk for an older individual that’s more likely to die from other causes.”
The CMI_2024 model was well received by market participants with very few minor changes requested between its proposal early in the year and publication in June. One aspect that was widely welcomed was the replacement of an adaptation that sought to account for the impact of the Covid-19 pandemic on life expectancy.
Until this year, modellers were permitted to place a lower weighting on mortality data obtained during the years when Covid-19 was rife in a bid to expose the underlying mortality rate. The new CMI model, instead, introduces a data overlay that halves each year to more explicitly model the disease’s run-off.
“In terms of acute mortality shock, the Covid-19 pandemic is largely behind us,” said Campbell.
“From a strictly mortality-modelling perspective, this means the direct Covid-19 effect should now be treated as part of the baseline, rather than as a separate structural feature.”
Another key development of 2025 that could impact mortality rates was the increased prescription of GLP-1 agonists. Marketed under brand names such as Ozempic, Wegovy and Rybelsus, their use in the UK has taken off with almost a million prescriptions signed by National Health Service doctors by the first quarter of last year, triple that of a year earlier. While that equates to about 190,000 people, it’s thought that when private prescriptions are included, the number of users soars to 1.4 million.
The drugs, designed initially to treat diabetes, have shown in clinical trials the ability to bring a 20% reduction in weight. Swiss Re estimates they could reduce all-cause mortality in the UK by more than 5% by 2045.
In a country where 64% of the adult population was overweight or obese in 2024, the drugs’ potential benefits seem huge.
“GLP-1 agonists offer genuinely meaningful and clinically observable improvements in population health, and their long-term potential should not be understated,” said Campbell.
Crystallise’s own estimates suggest that obesity, which has a direct influence on diabetes, liver diseases and cardiovascular dysfunction, has contributed to a 5%-10% increase in mortality among the over 65s.
“If GLP-1 therapies continue to improve, become more affordable and achieve sustained adherence, they have the potential to reverse the adverse mortality trends that have built up over decades,” Campbell said.
How this will impact mortality-linked pricing is difficult to predict. As the drugs come off patent and begin being sold in pill form, rather than the injectable form, their uptake will probably increase. The drugs will become more affordable, and the NHS will likely be prepared to dispense more of them.
However, their efficacy has not yet been fully assessed.
“The main unknowns are ‘will we see the same results in real world evidence as we see in the clinical trials?’” said McDonald.
“This will be affected by things like whether people stay on them and how disciplined they are and so on. And of course, how big will the uptake be?”