On the go: An increase in mortality rates brought about by the coronavirus pandemic, pressures on the healthcare system, and the cost of living crisis could see schemes’ liabilities reduced by around 2 per cent in the coming years, according to analysis from LCP.
The financial impact of excess deaths across 2020 and 2021 has been relatively small, but the true repercussions of the pandemic — such as belated diagnoses for chronic diseases — will be felt in the long term, the consultancy reported.
The overall impact on the health service and other factors with a bearing on mortality figures could justify scheme trustees and sponsors reducing life expectancies, though LCP is urging them to get to grips with the specific characteristics and experiences of their schemes.
Further factors impacting mortality include rates of flu, currently at a very low level, which LCP speculates could be responsible for this year’s mortality rate being so similar to 2019’s pre-pandemic level.
It suggested that the cost of living crisis could further widen life expectancy inequalities, though there has been a marked fall in excess deaths among older age groups from the highs reached during the pandemic.
LCP added that many trustees and sponsors are placing more emphasis on longevity in their overall risk assessments and journey planning, and that — despite uncertainty surrounding the true mortality rate — longevity risk pricing for longevity swaps, buy-ins and buyouts is at “its most competitive levels in recent years”.
The fact that life expectancy improvements are now slowing down should prompt the government to look again at the planned rise in the state pension age from 2026, the pace of which LCP argues is now excessive.
Chris Tavener, LCP partner and report author, said: “As we start ‘living with Covid-19’, the potential longer-term impacts on mortality are more uncertain than ever. Analysing emerging data, not only on deaths but also on the precursors of mortality, will be critical for fine-tuning mortality assumptions and making evidence-informed decisions in the future.
“Combining actuarial advice and insights from a wider range of health experts to help unpack the longer-term impacts is valuable to help trustees and companies manage their pension schemes.”
Dr Jonathan Pearson-Stuttard, LCP’s head of health analytics, added: “The impact of the cost of living crisis will be compounded by the pressure that is already growing on the NHS post pandemic, alongside the economic and social impacts of the Covid-19 impact.
“People are waiting longer before accessing services, are having to wait longer for operations, and may even face delays in getting treatment in an emergency. Our research shows these pressures will also be most sharply felt by those most in need.
“A targeted and proportionate effort will be needed to make sure that these twin crises do not combine to inflict a lasting legacy on the life expectancy of the most deprived populations,” he added.
