The 2022 Mortality Rate. How it is shaping the future of pension schemes:

The number of deaths in England and Wales last year was the highest it has been since 1993, excluding the pandemic.

According to data released by the Office for National Statistics, 576,896 deaths were reported in 2022. In addition, according to the Continuous Mortality Investigation (CMI) mortality monitor, mortality in 2022 was 4.8% greater than it was in 2019, the year prior to the pandemic.

WTW senior morality consultant Stephen Caine suggests the increased mortality rate is likely to be driven by a multitude of factors. This includes the NHS crisis, a new wave of covid infections, as well as the summer heatwave.

The change in mortality rates could have much larger implications, especially for the pensions industry. According to Stephen Caine, while the direct effect on pension scheme liabilities of an increased number of deaths in 2022 as compared to expectations may be “minimal”, there may be a meaningful impact if these deaths alter expectations of future mortality rates.

Caine stated that the model used to project future mortality rates is scheduled to be updated in June, and if the Charted Management Institute (CMI) were to adopt a business-as-usual approach, the life expectancies generated by the model could be approximately 10 months lower for a typical 65-year-old, resulting in a reduction of pension scheme liabilities by up to 4%. However, Caine also noted that the CMI is likely to consider the causes of high mortality in 2022 as being to some extent short-lived, which may lead to a reduction of the liability impact to around 2%, assuming trustees adhere to the model's core settings.

This, according to Caine, is sufficient to achieve "significant progress" in financing and de-risking programmes, and in some circumstances may imply that deficit recovery payments are no longer required.

References:

https://www.pensionsage.com/pa/Unexpected-number-of-member-deaths-could-reduce-scheme-liabilities.php https://www.theactuary.com/2023/01/17/mortality-rise-impact-pensions