The recent slowdown in life expectancy rises has settled into a general trend, according to new data.
The Continuous Mortality Investigation’s latest Mortality Projections Model indicates that yearly mean mortality improvements over the six years since 2011 have been 0.5 per cent for males and 0.1 per cent for females. These are both significantly lower than for any other recent six-year period.
On the back of the news, the Trades Union Congress called for the government to reverse its decision to bring forward the planned state pension age increase.
In July 2017, the government had announced plans to bring forward the state pension age increase to 68, to between 2037 and 2039, instead of 2044 and 2046.
Look at the bigger picture
The news of lower mortality improvements will not come as a surprise to the industry. In November, it was reported that improvement in life expectancy dropped to 1 per cent a year in 2016 from 3.1 per cent per year in 2011 in England and Wales.
Stephen Caine, senior consultant at Willis Towers Watson, urged against a “knee-jerk reaction” from schemes.
“Yes, there are lower levels of improvement, but that’s relative to a period of the first decade in this century where levels of improvement were really high. Over the first decade of the 21st century, average improvements were about 2.5 per cent a year,” he said.
Steven Baxter, head of longevity research at consultancy Hymans Robertson's Club Vita, called for schemes to carry out their own analysis on longevity trends.
“The most thoughtful pension schemes are stopping and thinking a little bit about the extent to what’s driving these trends, the extent to which these trends are truly relevant to them, and the extent to which this slowdown is something that may be shorter term, in which case obviously it’s potentially less relief in terms of your liabilities, or something which may be here to stay,” he said.
Insurers have responded to the slowdown
In November, 75 per cent of respondents to a survey conducted by consultancy LCP indicated an intention to conduct a risk transfer as part of their journey plan.
Charlie Finch, partner at consultancy LCP, said the biggest evidence for this slowdown becoming a trend is “the insurance companies and the reinsurers [reducing] their prices to reflect this trend”.
Due to longevity alone, Finch has observed a typical reduction of 3 per cent in insurance pricing.
