In recent years mortality improvements in England and Wales have slowed considerably and, since 2015, have actually started to worsen. Does this mean we are all going to die younger? What is causing mortality to worsen? What does this mean for pension schemes?
The much-publicised financial distress of the NHS is widely perceived to be the major contributor behind the recent worsening mortality in the UK. However, there is evidence that mortality rates are also worsening further afield. For example, in the USA, overall mortality increased from 2014 to 2015 – the first such increase in 20 years. The main causes of this increase have been attributed to the significant rise in deaths from Alzheimer’s (now, when combined with Dementia, the leading killer in the UK) and liver disease, largely put down to increasing drug and alcohol consumption.
The CMI will shortly be publishing their 2016 mortality improvement tables which will reflect this recent experience in the UK. The 2015 tables showed lower life expectancies than the 2014 version and the new 2016 tables are expected to show a further reduction.
When the 2015 tables were released, the Regulator commented that they were comfortable with the 2015 tables being used for funding valuation, however, they did not believe there was evidence to suggest that lower increases will continue. With the trend now set to continue for another year, it will be interesting to hear their views when the 2016 tables are released.
Our view: It is too early to say definitively if this trend is set to continue into the future. However, having seen two years of worsening improvements maybe it is time to change the widely held view that we will all continue to live longer. A key assumption for valuing liabilities, mortality is sure to be a major consideration for future funding negotiations in many schemes and, the beginning of an era of prolonged lower mortality improvements, may serve to improve funding levels! Every cloud…. hopefully a more cheery subject next time!