Defined benefit (DB) pension schemes need to understand how trends in public health will affect longevity assumptions following the publication of two ‘key’ reports into the NHS, LCP has stated.
The reports pointed towards a likely continuation of the ‘modest’ longevity improvements seen during the 2010s and suggested that the indirect effects of the pandemic were likely to continue to be felt over the short to medium term.
Lord Darzi’s independent review described the NHS as being in “serious trouble” amid long waiting times, reduced productivity, and low patient and staff engagement.
Meanwhile, the Institute for Public Policy Research report said the UK was the “sick man of Europe”, and recommended moving health policy away from a ‘sickness model’ to one of ‘health creation’.
LCP argued that the issues the NHS is facing were resulting in increased mortality and urged schemes to consider how the wider holistic picture of public health could affect mortality trends and the need for insight that brings together actuarial knowledge and clinical insights.
The consultancy recommended three top actions for schemes to consider when assessing longevity assumptions.
It urged schemes to stay informed about the latest trends in public health, noting that, in an uncertain environment, it was important to understand the possible drivers for future mortality changes.
Schemes were also encouraged to consider their membership as the effects of the Covid-19 pandemic were not being felt equally across the population, and mortality assumptions should therefore take account of the socio-economic profile of membership where possible.
Finally, LCP urged schemes to engage with their advisers amid increasingly complex actuarial models for mortality.
“The pandemic and the ongoing pressures on the healthcare system have significantly disrupted mortality trends,” said LCP partner and longevity specialist, Ben Rees.
“This has consequences for managing a pension scheme and solely relying on traditional actuarial methods to predict future mortality trends no longer works.
“Understanding the trends and drivers for future changes in mortality means trustees and sponsors will be able to make more informed judgments on the future of their own DB scheme.”
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