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In our latest mortality update, we consider the recent release of the CMI 2022 mortality projection model in light of experience since the Covid-19 pandemic and the current economic outlook.

Modelling a range of scenarios for mortality improvement in the coming years, we conclude that the core parameters set out in the CMI 2022 model fail to fully allow for recent experience and the factors that we believe will drive mortality experience in the coming years. This paper sets out a high level view of the modelling we have undertaken and our views on likely future mortality experience in the UK, together with our approach to adjusting the model to reflect our views.

Broadly, Isio considers that greater weight should be placed on adverse mortality experience since 2020 and that in the long term mortality improvements are likely to be slower than previously expected. This means that we expect life expectancies in the future to be lower than was previously expected and that this evolution of mortality estimates should lead to lower best estimates of pension scheme liabilities than in previous years.

A further consideration for Companies and Trustees managing their pension schemes may be the impact of evolving understanding of longevity on the cost to buy out pension scheme liabilities. If Isio’s view on mortality improvements becomes more widely accepted, then it is possible that buyout pricing will fall over time, allowing more schemes to transact and offering potential savings for sponsors that delay transacting until pricing moves.

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