New CMI model will lead to the first significant increase in pensioner life expectancies
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As part of the most in-depth review for several years, today, the CMI has published its latest Mortality Projections Model, CMI_2024.
The core version of the model results in a notable increase in life expectancies at age 65 for males of around 3 months, and a modest increase of 2 weeks for females.
This release is significant as the model is used by almost all trustees of defined benefit pension schemes for assessing the funding position of their schemes, and for sponsors to report their schemes’ financial position on their balance sheets. The model is also a key reference point in the pension risk transfer market.
The new version includes two key changes from previous versions of the model, intended to ensure the model better reflects the real world:
- The model now directly incorporates the impact of the pandemic on mortality rates, whereas previous versions sought to smooth through the distortion produced by the pandemic to project underlying mortality improvements.
- The model now allows different mortality trends for different age groups. This better reflects recent trends where mortality has improved more rapidly for pensioners than for people of working age.
Whilst the key principles of these changes have remained consistent since the consultation in February, the CMI have made several technical changes to the model, causing a further increase in life expectancies.
Ben Rees, Partner at LCP, said:
“Trustees and corporates have become accustomed to seeing successive CMI models reduce life expectancies. For the first time, the new model will lead to a significant increase in liabilities for many schemes if they choose to use the core model “out-of-the-box”.
“It remains to be seen how quickly the NHS will recover from its current position and the extent to which developments, such as anti-obesity medications, will improve future mortality. Those who have independently formed their own view on future mortality can continue to take advantage of the CMI model’s flexibility to express that view.”
