The Continuous Mortality Investigation (CMI) has ignored mortality data for data for pandemic years 2020 and 2021 stating that data for these two years has no weight in life expectancy and mortality projections.
CMI has released a consultation on its proposal for the next annual update to the CMI Mortality Projections Model, CMI_2023, which plans to release in April 2024.
If the proposal is adopted, CMI_2023 would produce cohort life expectancies at age 65 that are very similar to those in the previous version of the CMI model, CMI_2022 – around one week lower for males and one week higher for females.
The CMI Model is used by UK pension schemes and insurance companies that need to make assumptions about future mortality rates. While mortality experience in 2020 and 2021 will affect actuarial calculations, mortality in both of those years was exceptional and is unlikely to be indicative of future mortality, CMI stated.
“For this reason, the CMI places no weight on the data for 2020 and 2021 in the core version of the model, effectively ignoring those years,” it added.
Cobus Daneel, chair of the CMI mortality projections committee, said: “While mortality since 2022 has been less volatile, mortality rates are still higher than what we expected prior to the pandemic which could plausibly be interpreted in a few ways: Were our pre-pandemic views too optimistic? Are there lingering short-term effects that will rapidly fade out as we revert to the pre-pandemic trend? Or did the pandemic have a fundamental impact on the longer-term trend?”
He noted that CMI “aimed to strike a balance between differing views” with its proposals for CMI_2023 which would lead to similar life expectancies as in CMI_2022.
“We are conscious that the outlook for mortality remains uncertain and there is a range of reasonable projection methods and projected mortality rates,” Daneel added.
CMI is consulting on its proposals to gauge the views of model users, he said, adding: “Given the uncertainty, we encourage and expect many users to modify the model parameters or methods to reflect their own portfolios and their views of the impact of the pandemic.”
More recent mortality has been less volatile and is more likely to be indicative of future mortality to some extent. Standardised mortality rates based on registered deaths in England and Wales in 2023 were similar to the 2015-2019 average and lower than in 2020, 2021 and 2022.
Given that, CMI proposes placing 10% weight on data for 2022 and 2023 when calibrating CMI_2023 while still placing no weight on data for 2020 and 2021.
“As weights do not affect projections linearly, placing a 10% weight on data for 2022 and 2023 results in a projection that falls nearly half-way between a projection that places no weight on these years and one that gives them full weight,” CMI stated.
Chris Tavener, partner at LCP, said: “Projecting life expectancies is particularly tricky at the moment given the ramifications of the COVID-19 pandemic and the ongoing pressures on the NHS [National Health Service]. It is, therefore, not surprising to see that the committee was split on whether life expectancies should remain unchanged or fall.”
He said that LCP’s advice to trustees and sponsors of pension schemes highlights the need to “think carefully about the drivers of mortality and how they will affect their members in the future”.