The global economic discussion has focused on assessing what damage COVID-19-related lockdowns have caused, and more recently on questioning the speed and strength of the recovery.

The biggest threat to recovery will be a second wave of infections prompting new restrictions – some have already been reimplemented. Yet, even if the virus is controlled, there are several existing economic headwinds for investors to grapple with.

No need to panic

Earlier this year the pandemic battered markets as indices recorded some of the worst performances in the history of stock markets. Central banks around the world announced further quantitative easing while governments announced economic bailouts.

But what does a second wave of infections mean for pension funds and, in the long run, how will that affect schemes’ processes and strategies?

COVID-19 is likely to remain widespread for a while at least until an effective vaccine is available. It is therefore crucial to understand pension scheme members’ vulnerability to the virus.

Although this year’s mortality rates have been heavier than expected, it could be that future mortality may be lighter than anticipated. In the short term, it is possible that people who died in 2020 would have otherwise died in the next few years.

As the Continuous Mortality Investigation (CMI) projections model disclosed, the mortality rate experienced this year is not indicative of long-term trends. COVID-19 is causing real disruption for all trending mortality models, but it is key that pension schemes do not overreact to this short-term disruption.


Venilia Amorim

Pension schemes have always been exposed to longevity risk before COVID-19 came about and have tried to reduce their exposure to that risk through the same instruments (longevity swaps, bulk annuities) long before now. The message is clear: do not panic!

Venilia Amorim, editor,