- If insurers adopt the most up to date assumptions for mortality, then the cost of insuring benefits is likely to reduce. It may be a good time for sponsoring employers to consider this option if they are already close to being able to secure benefits.
- The size of cash equivalent transfer values will fall if calculations are updated to reflect new mortality assumptions. Anyone considering a transfer or within a guarantee period may want to consider this.
- The size of the scheme’s technical provisions will likely fall if the trustees decide to adopt the most up to date mortality assumptions in the scheme’s triennial valuation.
- Accounting deficits may reduce.
Trustees and sponsors of defined benefit (“DB”) schemes could be forgiven for assuming that the only way was up for life expectancies of their scheme members. For decades, mortality rates had been significantly improving. In the context of DB schemes, this generally resulted in more costly benefit provision for sponsoring employers. The Continuous Mortality Investigation (“CMI”) then introduced their 2016 mortality improvement tables which showed a slow down in mortality improvements and therefore a reduction in life expectancy in comparison to previous years. Was this a blip? The 2017 tables have shown the same slow down. Perhaps one of the biggest indicators that this is the ‘new norm’ is the PPF consulting to revise their s143/s179 guidance to reflect updated mortality assumptions. In relation to DB pension schemes, what might this affect?