On the go: The coronavirus pandemic is driving uncertainty over life expectancies over the next five to 10 years, according to new research.
The virus yielded more than 100,000 more deaths in England and Wales than might otherwise have been expected, representing only an approximate 1 per cent drop in liabilities, Barnett Waddingham said.
The consultancy warned that schemes need to consider, rather, the medium-term impact on longevity wrought by the pandemic.
This is because the virus has thrown up factors that could either increase or decrease life expectancies.
Coronavirus vaccines, for example, appear to have cut the number of direct virus deaths. Those with poor health may have also died earlier than expected, meaning that the population’s mortality rate will be lower than otherwise predicted over the medium term.
However, a spike in coronavirus-linked deaths as restrictions are lifted and a rise in related long-term illnesses are just some examples of the pandemic weighing upon life expectancies.
Barnett Waddingham cautioned that this uncertainty could have an impact on bulk annuity pricing, although any noticeable changes to pricing will not be immediately obvious.
Insurers, which are usually more cautious than pension schemes when assessing assumptions that may impact their liabilities, will take their time to analyse emerging data and adjust prices appropriately.
The volume of UK bulk annuity transactions dropped towards the end of last year, although buy-ins and buyout deals rose between the third and fourth quarters, according to MandateWire research.
Simon Bramwell, principal and head of longevity risk transactions at Barnett Waddingham, said: “For many, longevity risk remains mostly unhedged and now should be a time for schemes to assess.
“With this elevated uncertainty likely to be around for some years to come, this may be a better time than any to remove this unrewarded risk and focus on certainty around reaching the scheme’s endgame.”
