Jonathan Harris, mortality expert at WTW, said: “Assumed life expectancy for pension scheme members is generally expected to increase following the release of CMI_2024, but the effect depends on the starting point for the comparison. Life expectancies under CMI_2024 are higher across the age range than under the proposals consulted on in February. The biggest effect is for men aged around 45, whose life expectancy is about three and a half months higher as a result of the tweaks the CMI has made. Compared with last year’s CMI_2023 model, which was widely adopted for 2024 company accounts, life expectancies are higher at older ages but lower at younger ages. With pension schemes becoming increasingly mature, the effect on a typical scheme will be to increase liabilities. Liabilities for a typical scheme should be around 1% higher under CMI_2024 than under CMI_2023. However, life expectancies are still lower than under the models that schemes undergoing new actuarial valuations would have used when they last went through this process three years ago, adding to the improvement in funding positions since then. The big picture is that mortality rates in 2024 were the lowest on record but still meaningfully higher than would have been expected before the COVID-19 pandemic, and that the path forward remains highly uncertain. Some schemes that are not planning to buy out imminently are looking to use some surplus to hedge mortality risk so that the financial consequences of this uncertainty become someone else’s problem.”
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.”
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