The CMI (Continuous Mortality Investigation) has followed up its prototype Mortality Projections Model (published 19 June 2009) with further details on the rationale for the model (published 7 July 2009).

Nick Flint, Chief Executive at Club Vita, said:  “We support CMI’s objective – ‘cohort’ projections based on insurance company data are inherently flawed – and agree with many aspects of the CMI’s new proposals, but pension schemes should remain wary.

“This is a good opportunity to learn from the flaws of the ‘cohort’ projections, however there is a danger that schemes may, by default, move to projections based on wider UK population data.  This is the wrong starting point.  Our research demonstrates clearly that longevity trends in occupational schemes differ markedly from those in the wider UK population.  Schemes must base their projections of current trends on the most relevant data and that can only come from other occupational schemes.”

Club Vita’s Steven Baxter added:  “In the current economic climate, it is more important than ever for companies and trustees to have a reliable estimate of costs of pension promises.  Relying on UK population data from the ONS (Office of National Statistics) for trends is misleading: Club Vita’s research has shown that trends are significantly different in occupational pension schemes. 

”We have seen the life expectancy of higher earners increase by over 3 years in the last decade – compared to just 1.5 years for lower earners.  Allowing for these trends can easily make a £5m difference to the funding of a £100m pension scheme.“