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COVID-19 mortality and its effect on pension schemes in 2020 and the unknown beyond

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COVID 19 Coronavirus

By Stephen Caine | September 4, 2020

Stephen Caine explores what we have learned so far and what remains uncertain about the COVID-19 pandemic and its mortality impact on pension schemes.

It is over five months since the first death from COVID-19 in the UK and since social restrictions came into force. It is estimated that more than 60,0001 people in the UK have died directly or indirectly from the pandemic so far, and the UK economy has just entered its deepest recession on record. With the infection tailing off, despite a resurgence of cases in some areas recently, now is a good time to take stock of what we know and what remains uncertain.

When we look at the statistics we find that the UK has suffered significantly relative to its European peers, although the mortality impact on pension schemes to date is likely to be small. The future is, however, extremely uncertain.

The pandemic could prove to have a significant effect on future mortality rates, and this is where a material financial impact for pension schemes could lie, with potential implications for long-term funding and investment strategies.

We recommend that trustees and sponsors consider a range of plausible longevity outcomes when reviewing such strategies, in order to plan effectively.

What we do know

  1. 01

    First wave impact

    The first wave of infection looks to have all but passed; the death toll of over 60,000 is at the top end of the range that was predicted under a mitigation strategy*. Whilst this is a devastating loss of life, the direct impact on pension schemes is likely to be small. Trustees and sponsors may find pension scheme liabilities are unchanged or have reduced by perhaps as little as 0.1% from members dying sooner than expected.

  2. 02

    UK the worst in Europe

    The UK has emerged from the pandemic as the worst hit European country, according to the Office for National Statistics’ recently published report, Comparisons for all-cause mortality between European countries and regions: January to June 2020. The report provides the best comparison to date, using all-cause 'excess' mortality rates which look beyond incomparable COVID-19 death figures (because each country uses a different definition of a COVID-19 death) to treat each country’s experience consistently.

    While England did not have the highest peak mortality (Spain did – see figure 1), it did have the highest overall excess mortality outcome and the longest continuous period of excess mortality of the European countries compared (see figure 2). Other Western European countries experienced more geographically localised mortality, whilst the effect within the UK has been much more widespread, meaning most UK pension schemes will have been affected to some extent.

  3. 03

    Mortality displacement

    Death numbers in the UK to 7 August were below the five-year average for eight consecutive weeks, despite ongoing deaths from COVID-19. The decline in weekly death numbers could be an indication of short-term mortality displacement occurring (i.e. some of those early pandemic deaths being individuals who may have died this year anyway). As a consequence, we may find that the mortality impact of the pandemic on UK pension schemes is even more limited. (The recent decline could also simply be due to the natural variation in mortality rates between years – i.e. from other factors – because the start of 2020 was also below average.)

  4. 04

    Social and demographic impact

    COVID-19 has had more of an impact on older lives and on the lives of those from less well-off backgrounds. However, the data shows that the less well-off have not been disproportionately affected – they are more likely to die from all causes of death, and coronavirus has been no different. At this stage it is fair to assume that pension schemes have been affected broadly in line with the UK population, although this will vary from scheme to scheme, dependent on the industry and location.

What we don’t know

  1. 01

    Future waves of infection

    It is impossible to predict the extent of any future waves of coronavirus infection as current restrictions are eased further. Uncertain factors include how willing the public is to adhere to further restrictions like those imposed recently in Leicester and the North West, or whether public patience is running out. Uncertainty also relates to the speed and effectiveness of vaccine development, and whether individuals can develop natural immunity to the disease.

    Pandemic modelling carried out by Willis Towers Watson predicts that a second wave could result in as few as 2,000 excess deaths or well over 100,000, depending on how you model the factors above. This highlights the importance of these factors on the outcome. The toll from any future waves of infection will lead to a greater impact on pension scheme liabilities.

  2. 02

    Long-term health factors

    Whilst the immediate mortality impact of COVID-19 may be small, pension schemes are likely to be affected by longer-term factors. For example, the economic recession could put a strain on people’s health and wellbeing, as well as on healthcare provision. The virus has also delayed the treatment of unrelated conditions for thousands of people in the UK and could have as yet unknown long-term repercussions for those who have survived it. If life expectancy improvements stall for a prolonged period as a result, say 15 years, pension scheme liabilities could cost 2% less than expected, eclipsing the impact from COVID-19 deaths in 2020. However, this trend will take years to be recognised, meaning that it will not have an immediate impact on pension scheme valuations.

  3. 03

    Positive consequences from the pandemic

    The behaviours encouraged during the pandemic could have a positive long-term impact on mortality and life expectancy. For example, greater appreciation of infection risks could reduce the mortality rate from the annual flu cycle. For some, healthier habits adopted during lockdown (such as eating more healthily, exercising regularly and relying less on motor vehicles) could imbed themselves, especially if the crisis leads to a permanent change in working habits and a reduced level of commuting. It is difficult to know if this could offset the negative long-term factors discussed above, but it is one to be watched keenly.

  4. 04

    Impact on insurer pricing

    Schemes looking to obtain pricing in the near future may want to check their own membership data to see whether they have been particularly affected and to ensure that this information is passed on to potential insurers providing quotes. It is unlikely, however, that any predicted slowdown in life expectancy improvements will be reflected in a reduction in insurer pricing any time soon – any new trend will take time to establish, and history tells us that insurers are more cautious about incorporating trends that reduce life expectancy in their pricing than pension schemes are in their valuations.


1. An influential report from researchers at UCL and Cambridge University released in March estimated a mitigation strategy may slow the virus down to cause between 35,000-70,000 deaths
2. Excess deaths as described in the CMI’s mortality monitor. ‘Excess’ deaths are the difference between actual deaths in 2020, and those that we would expect if mortality rates had been the same as in 2019.


Stephen Caine
Senior Mortality Consultant

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