Commenting on the CMI model

“2019 saw record low mortality in England & Wales¹. The new CMI improvements model reflects this, showing a slight uptick in how long it projects we will live for. Whilst the increase might only equate to 1 month of extra life expectancy, it is significant in being the first such uprating in the last 7 editions of the model².

We hope that trustees and sponsors will engage with the latest projections. However they need to exercise caution in using the projections in their “core” format. Most pension schemes liabilities are skewed towards higher income individuals. As highlighted in the recent Marmot report, these individuals have been resilient to the slowdown seen in the 2010s. Club Vita analysis suggests that recognising this could add 1-2% to technical provisions.

Of course, one swallow does not a summer make. And whilst we have had a very strong 18 months, it is too early to tell if this is the start of a return to sustained improvements. Meanwhile, the industry is looking closely at this winter’s outturn and what happens over the rest of this year, including of course with Coronavirus.”

Notes on calcs

1. As a rate per 100,000 alive and on an age-standardised basis to allow for the general ageing of the population.
2. Based on life expectancy of someone 65 as at 1/1/2020, and core versions of the model using a long term rate of 1.5%. Note that during the last decade the model has been revised a number of times and in some years the decrease has been (in part) driven by methodological changes.