The CMI (Continous Mortality Investigation) has confirmed its plan for the next version of the CMI Mortality Projections Model (CMI_2021) in Working Paper 157.
The CMI Model is used by the vast majority of UK defined benefit pension schemes when determining how life expectancy of members is likely to develop in the future. Changes to the model can therefore materially affect the funding levels of pension schemes.
The headline announcements from this working paper are:
|Expected release date of CMI_2021: March 2022||Default weight to place on data in 2021 (and 2020): Nil weight||Life expectancy from CMI_2021 expected to fall by about 0.3% at age 65 compared to CMI_2020|
In explaining its plans, the CMI notes that mortality in 2021 has been abnormal as a result of the pandemic, and mortality data for 2021 therefore contains little information about how future mortality is likely to develop. The CMI used similar reasoning to justify the change in method for the previous version of the CMI Model, CMI_2020. The CMI will therefore not use data for 2020 or 2021 to determine future changes in life expectancy in the default version of CMI_2021.
The CMI will implement the 2021 weight parameter as a new Extended parameter, alongside the 2020 weight parameter, the initial addition to mortality improvements and the period smoothing parameter. This means that there will be two Extended parameters that users of CMI_2021 can use to reflect their views on how post-pandemic mortality improvements will differ to pre-pandemic expectations, and there is therefore likely to be a period after CMI_2021 is released where the market debates the most appropriate parameterisation of CMI_2021 to reflect these views.
In the context of increasingly complex longevity models, as well as an increased focus from The Pensions Regulator on pension scheme long-term funding targets, BW's longevity experts can help you navigate the longevity landscape. This can include giving pension scheme trustees a better understanding of the mortality characteristics of members and options available for reducing longevity risk.
Further details of the ways we can help can be found here.