The CMI’s (Continuous Mortality Investigation) prototype Mortality Projections Model (published 19 June 2009) has been prompted by its concern about the widespread use of Interim Cohort Projections.  These projections do not take account of longevity experience data published after 1999 and, as a result, have become increasingly outdated.

Nick Flint, Chief Executive of Club Vita – the longevity comparison club for occupational pension schemes - said:  “We welcome this move away from the widely used ‘cohort’ projection models.  Our research has shown that mortality trends in occupational pension schemes over the past 15 years have differed significantly from assumptions derived from cohort projections.

“It’s not surprising that pension schemes have found the cohort projections wanting; they relied on data from insurance companies, whereas the most relevant information has to be that derived from pension schemes.   Schemes should ensure that the projection models they use make use of the most appropriate data sets – those based on occupational pension schemes.

“Longevity is a risk management issue.  While trustees must make an allowance for future improvement to determine short-term contribution requirements, they should recognise that new evidence will emerge over time: there is no certainty in projecting future trends.  Moreover, the experience of a particular scheme may be specific to that scheme.  Longevity should be addressed as a risk management issue as part of schemes’ annual governance cycle.  It should not just be seen as a funding problem to be measured every three years.”