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Live long and prosper?

2015 saw a large jump in the number of deaths registered in England and Wales. Total deaths in 2015 were 529,613 compared to 501,424 deaths in 2014, a 5.6% increase. This has now been attributed to an increased number of deaths due to dementia and respiratory diseases, such as flu, in the early months of 2015.

This comes against a background of improving life expectancy – in 2012-2014 a 65-year-old man could expect to live another 18.7 years, compared to 14.5 years in 1992-1994.

So where does this leave pension schemes? Defined benefit schemes will make assumptions about base mortality rates and future improvements when valuing liabilities for a range of purposes.

Base mortality rates are likely to revert to 2014 levels, so there is little reason to change the base table in use. The effects of greater mortality in 2015 will emerge as an experience item at the next formal valuation.

Most schemes will base assumptions regarding future improvements to mortality on the Continuous Mortality Investigation (CMI) model which is produced each year. The 2015 version of this model shows reduced improvements at most ages, and therefore lower expectations of life than the 2014 model.

However, medical advances continue apace with significant progress in immunotherapy treatments for cancer, and stem cell and regenerative medicine being developed to treat a variety of conditions. There are also indications that ageing can be treated as a disease, so it seems likely that improvements in longevity will continue in the future.

Only time will tell if 2015 marks the end of the continuous improvements to longevity, or if it was a temporary setback.