Mortality rates in England & Wales in 2021 were on average 5 per cent lower than in 2020 but actuaries are unsure how the Covid-19 pandemic will affect future rates.
The Continuous Mortality Investigation (CMI) latest annual update to the CMI Mortality Projections Model, CMI_2021 found that standardised mortality rates in England and Wales were 5 per cent lower in 2021 than in 2020. Mortality in 2021 was 8 per cent higher than in 2019 and mortality in 2020 was 14 per cent higher than in 2019.
UK pension systems and insurance businesses that need to make estimates about future mortality rates employ the CMI Model. While actuarial calculations will be influenced by mortality in 2020 and 2021, mortality in both of these years has been impacted by the Covid-19 pandemic.
Isio head of research and development Iain McLellan says: “With this latest release from the CMI, the profession is firmly sitting on the fence. Updating the projection model, but having a default that ignores the last two years of data isn’t really an update.
“It might be considered the sensible thing to do given the uncertainty, but perhaps this decision highlights the shortcomings of a methodology which extrapolates from past data when we experience a mortality shock event. Adding in further complexity to the model will not help make it any more accurate, but will make it harder for trustees and pension scheme sponsors to understand and make decisions.
“Presumably the release of the latest model will lead to divergent outcomes as individual actuaries are asked to draw their own conclusions. I expect we will see some recycling of old actuarial jokes as a result – have you heard the one about asking two actuaries a question and getting three different answers?!”
CMI Mortality Projections Committee chair Cobus Daneel says: “While mortality can be volatile from year to year, we tend to see falls over time so it is unusual to see such a sustained increase in mortality. We have to go back to 1940-41 to find a period as unusual as 2020-2021 relative to the preceding five-year average.
“The impact of the coronavirus pandemic has meant that we have placed no weight on 2021 mortality experience. We did the same with the 2020 core model after a consultation process and users from the pensions and insurance industry expressed strong support for this temporary change. We encourage users to consider adjusting the model’s parameters to reflect their own portfolios and their views of the impact of the pandemic.”