The Legacy of the Pandemic for Pension Scheme Mortality

The Covid-19 pandemic has caused a dramatic shock to health and life expectancy, disrupting the pattern of mortality improvement seen historically in the UK population.

Since March 2020, we have witnessed over 160,000 excess deaths compared to what would have been expected if mortality rates had remained at pre-pandemic levels. Early on, the vast majority of excess deaths were a direct consequence of Covid infections. As time goes on though we are increasingly also seeing excess deaths arise from indirect impacts of the pandemic such as disruption to the health system and changes to individual health-seeking behaviour. Medical diagnoses have been missed or delayed – for example, 2020 saw large falls in new prescriptions to manage blood pressure and cholesterol levels, which have not been caught up. In December 2022 the average ambulance response time in England for category 2 calls (which can include strokes and heart attacks) was over one and a half hours. That is against a target of 18 minutes.

Whilst most direct deaths from Covid-19 were among older people, the relative increase in mortality rates was broadly comparable across all age groups in 2020. As time has gone on and indirect impacts have increasingly influenced mortality rates, it is younger adults experiencing the biggest relative increase. Many of these excess deaths are from cardiovascular causes.

Age is certainly not the only relevant lens through which to view the impacts of Covid-19. Clear differences have been apparent at various stages of the pandemic when looking at other demographic, geographic and socioeconomic indicators. For example, the most deprived fifth of the population experienced disproportionately high excess mortality during the first wave. This was partly because they were more likely to be in occupations that exposed them to the virus, and partly due to prevalence of health conditions that made serious illness and death more likely.

The pandemic presents a significant challenge to pension scheme trustees and sponsors on the allowance that should be made for Covid-19 when adopting mortality assumptions for their schemes. When giving advice on mortality assumptions, actuaries tend to use models which project future mortality rates based on past data. Given the volatility of recent data, these models may now produce unreliable forecasts or require more significant subjective adjustment than previously. The latest model of mortality improvement from the Continuous Mortality Investigation (CMI) makes no allowance for Covid-19 by default.

This means that it has never been more important to understand the underlying drivers of changes to mortality, and how these affect different groups. Some drivers will have a comparable impact on all of society, but others may affect members of a specific pension scheme differently to other pension schemes or the general population. For example, a scheme’s membership might be concentrated in a region where waiting lists are particularly long and the local population’s unmet healthcare needs are significant.  

Even before the pandemic struck, there was extreme longevity inequality in the UK, with an astonishing 27-year gap between the life expectancy at birth of men in the local areas with the highest and lowest life expectancy. The life expectancy gap was widening pre-pandemic and we expect it to continue to do so for at least the next few years. What happens beyond that is harder to say as it depends in large part on political choices. One of the UK Government’s “Grand Challenge” missions is to “ensure that people can enjoy at least five extra healthy, independent years of life by 2035, which narrowing the gap between the experience of the richest and poorest”. The Covid-19 pandemic will make this ambitious goal even more challenging to deliver.

Stuart McDonald is a Partner and Head of Longevity and Demographic Insights at Lane Clark & Peacock LLP