New mortality model will lead to longer life expectancies for most schemes

The UK Actuarial Profession's Continuous Mortality Investigation (CMI) has released the latest version of its mortality projections model, "CMI_2024". This model, used by most defined benefit (DB) pension schemes when setting assumptions, projects the path for future mortality rates.

Key highlights

Life expectancy trends (compared with last year's model):

• Older adults: Life expectancy under the model rises for males over 45 and females over 60. For instance, men aged 85 can expect to live two months longer, while women of the same age gain six weeks. At 65, men gain three months and women two weeks.
• Younger adults: Conversely, life expectancy at age 35 drops by about five weeks for both genders. The increases in life expectancy are slightly more pronounced than under the original proposals for CMI_2024, consulted on earlier in the year.

Impact on schemes (compared with last year's model):

The overall effect on pension schemes will vary based on the age profile of their members. Generally, adopting CMI_2024 over CMI_2023 will increase scheme liabilities by around 1%.

Detailed insights

Incorporating 2024 data

In addition to the inclusion of data from England and Wales for 2024, CMI 2024 also includes significant model changes:

• COVID-19 impact: The pandemic's effects are now reflected using an 'overlay' instead of 'weights'.
• Recent mortality trends: These trends, varying by age, are integrated into the initial projections, affecting scheme liabilities to a different extent depending on the age profile of the membership.

Record low mortality rates

2024 saw the lowest mortality rates on record for England and Wales, lower than 2019, prior to the pandemic. After a prolonged slowdown in population mortality rate improvements since 2011 followed by the COVID-19 pandemic, this overall more positive outlook in CMI 2024 ends the trend of declining life expectancies in successive model iterations.

Mixed picture

While older adults see improved life expectancies, mortality for those under 45 remains at a higher level than observed in the early 2010s. The model's more optimistic outlook for older members contrasts with a less favourable view for younger ones.

Scheme liabilities

Adopting CMI 2024 may slightly increase liabilities for DB pension schemes. However, for triennial actuarial valuations this year, which may have last used the CMI 2021 model, liabilities could still decrease. Despite returning to pre-pandemic levels, mortality rates are still higher than expected based on pre-pandemic projections.

Insurers' views

Schemes eyeing near-term buy-ins or buyouts will closely watch how insurers adapt their models, as they often incorporate new data points more swiftly.

Technical improvements

The CMI 2024 model also includes several other more minor technical enhancements.

Change in life expectancies

The table below shows the percentage change in life expectancy from CMI_2023, which varies across the age range.

Note: Life expectancy changes are at 1 January 2025 based on typical base mortality tables, projected from 1 January 2017 with core model parameters and a long-term improvement rate of 1.5% pa.