A range of events in the past few years have had a significant impact on mortality in the UK, and arguably the outlook is as unclear as it has been for some time. Greg Winterton caught up with Cobus Daneel, Chair of the CMI Mortality Projections Committee at the Institute and Faculty of Actuaries, to find out what is top of mind in the mortality actuarial world as we look ahead to 2025.
GW: Cobus, let’s start with the CMI’s mortality monitor, the organisation’s quarterly update. The most recent update was published in early October. What are the main conclusions that should be drawn from UK mortality data so far this year?
CD: In addition to our more extensive quarterly mortality monitors, the CMI also publishes shorter weekly monitors for those interested in the most up to date information on mortality trends. In the last quarterly monitor, we highlighted the fact that, while mortality rates in 2024 appear to be broadly in line with the record lows we’ve seen in 2019, there are significant differences across the age range. At older ages we are seeing a robust recovery, but mortality rates at younger ages are remaining stubbornly high following the pandemic.
GW: Earlier this year, the CMI’s Self-administered Pension Schemes (SAPS) Committee published its latest annual analysis of the mortality experience of members of UK defined benefit pension schemes. What are you seeing here? How, if at all, is mortality for this cohort different to that of the general population?
CD: On average, life expectancies of DB pension scheme members exceed that of general population by about 1 to 1.5 years as they are typically from more affluent socio-economic groups. However, there can be quite a lot of variation between individual pension schemes, depending on the exact composition of their membership. The latest SAPS annual analysis suggests that mortality for DB pensioners has developed broadly in line with expectations, albeit with narrowing differentials between amount bands. It also adds further evidence that the impact of the pandemic during 2020 and 2021 was less severe for DB members.
GW: And what’s the impact of this on the seemingly relentlessly growing pension risk transfer market in the UK?
CD: Recent developments in longevity does not appear to be having much of a direct impact on the pension risk transfer market. This is not unexpected – often other factors such as credit spreads have a more significant impact on pricing and, while views regarding the future path of mortality rates have changed, the overall assessment of longevity risk has remained stable. However, indirectly, lower life expectancies (combined with higher interest rates) have reduced DB pension liabilities and deficits, which mean that more DB schemes are in a position where they can transact.
GW: You modified the calibration process for CMI_2020 in your most recent model, CMI_2023, due to the exceptional nature of mortality data during the Covid-19 pandemic. What has been the feedback from your subscribers and what are the chances this might be adjusted again in future?
CD: Our subscribers have been generally supportive of the changes we’ve made to the CMI model as well as the overall core projections. However, there are concerns regarding the frequency of interventions in recent times and transparency of the process. As such for CMI_2024 we are consulting on some changes to the model with the aim of improving transparency and reducing the need for future interventions.
GW: Lastly, Cobus, what is top of mind for you and your colleagues at the CMI as we look to 2025 in terms of what is having or might potentially have a significant impact on UK mortality?
CD: Since the pandemic a key question has always been whether mortality rates will once again return to the pre-pandemic trend or if the pandemic will have a more fundamental impact in the medium to longer term. Whether or not we see another significant improvement in mortality in 2025 may go a long way in answering that question. We’ll also be keeping a close eye on potential further divergence between age groups as well as any indications regarding progress in terms of Health and Social Care challenges.
Cobus Daneel is Chair of the CMI Mortality Projections Committee at the Institute and Faculty of Actuaries and a Pensions Actuary at WTW