The CMI committee said it "was unusual" to see three consecutive years where mortality rates were so much higher than recent trends would suggest.
An annual update to the CMI Mortality Projections Model has shown that mortality was 'significantly higher' than it was before the coronavirus pandemic.
Mortality rates in England and Wales in 2022 were on average there per cent lower than in 2021, but when compared to mortality in 2019, mortality in 2020 was 14 per cent higher, mortality in 2021 was nine per cent higher, and mortality in 2022 was six per cent higher.
The CMI Model is a mortality monitor published by the IFoA and is used by UK pension schemes and insurance companies which need to make assumptions about future mortality rates.
Coronavirus pandemic
Cobus Daneel, chair of the CMI Mortality Projections committee, said it was unusual to see three consecutive years where mortality rates were so much higher than recent trends.
The committee pointed out that mortality in both years was exceptional and "was unlikely" to be indicative of future mortality. It added: "For this reason, the CMI places no weight on the data for 2020 and 2021 in the core version of the model."
For now the CMI has placed a 25 per cent weight on data for 2022 when calibrating the update while still placing no weight on data for 2020 and 2021.
The update does produces cohort life expectancies at age 65 that are about seven months lower for males and about six months lower for females than in the previous version of the CMI model, CMI 2021.
Daneel added: "Even during prior pandemics such as the Asian Flu (1957/58) and the Hong Kong Flu (1968/69). We have to go back to World War II to find a period as unusual as 2020-2022 relative to the preceding five-year average."
“The exceptional nature of mortality in 2020 or 2021 due to the coronavirus pandemic meant that we placed no weight on mortality experience for those years. However, more recent data has been less volatile and suggests that mortality may remain higher than our expectations before the pandemic for some time. We have given partial weight to data for 2022 in the CMI Model, which leads to lower life expectancies."
“We made this change after a consultation process and received support from users in the pensions and insurance industry. However, we still encourage users to consider adjusting the model’s parameters to reflect their own portfolios and their views of the impact of the pandemic.”
The data used to calibrate CMI 2022 was also revised to reflect results of the 2021 census and used ONS population estimates for 2021, which take account of the census.
The ONS has not yet published its own revised estimates for 2012-2020. The revised population estimates for 2012-2021 account for around one month of the total six to seven month fall in life expectancies at age 65.
Pension schemes and increasing mortality rates
Iain McLellan, director of research and development at Isio, said life expectancy updates may lead to improvements in funding levels. He added: “However, changes in life expectancies only tend to get factored into assumptions as part of the three-yearly valuation process, so it may be some time before schemes start to reflect the changes. For those doing valuations at the moment, it should open up options of shorter recovery plans, reduced deficit payments, greater ability to de-risk or a combination of all three."
Claire Trott, divisional director retirement and holistic Planning at St. James’s Place said although the statistics were showing a drop in life expectancy, this was clearly based on a large amount of data and therefore not directly applicable to any individuals.
“Savers should still be mindful of their general health and anything specific that may impact their mortality when considering their savings and how long they will need their savings to last. The reduction in life expectancy may see changes in annuity rates, although the majority of annuities sold currently are tailored to the individual, based not only on the funds they have but their general health, specific issues such as smoking as well as where they live, so generalities such as the findings of this are less relevant."
"We are also still only a short time since the pandemic and the knock on impact of that will have skewed the figures, so much so that the Institute have amended the weighing of their calculations to try and take account of this. It won't be clear for many years to come if the pandemic has reduced life expectancy for the long term or if this was just a short term impact."
