Aon has cautioned against over-stating the negative impact that the pandemic could have on longevity assumptions of UK pension schemes, stating that a positive change was not impossible.

The firm stated that it was easy to jump to the conclusion that the outlook for longevity was “overwhelmingly negative” because of the 73,000 excess deaths suffered in 2020 and the 35,000 excess deaths resulting from the fresh wave of Covid-19 that has hit the country in the new year.

However, Aon Risk Settlement Group head of demographic horizons, Tim Gordon, stated that this was “not necessarily the case” as a poll from a recent Aon webinar for insurers and reinsurers had found that around 40 per cent of participants thought the longevity outlook from mid-2021 was roughly the same as before the pandemic.

Roughly 30 per cent thought the outlook was slightly worse than before Covid-19 hit and 30 per cent thought it had improved.

Gordon commented: “This is consistent with our understanding of the broad consensus across the insurance industry, that while it is certainly possible that future longevity improvements may stall because of the direct and indirect impacts of Covid-19, there are also potentially positive factors.”

He added: “It has been a conundrum for 100 years that recessions can be positive for longevity. This is not a certainty – health and social care spending are critical unknowns – but the negative impact of recession on longevity is not the given that many commentators assume it is.”

Gordon explained that other factors could prove positive for longevity, such as “the improvement of UK systems to deal with future pandemics and accelerated health benefits from wider application of mRNA vaccines”.

Additionally, he pointed out that, “harsh as it may sound”, the surviving population might be “more robust in the short term” and that the pace of the UK’s vaccine rollout coupled with investment in future vaccine production could reduce the danger of “some of the more extreme Covid-19 scenarios”.

Gordon concluded: “Simply put, it is not necessarily the case that the outlook for future longevity has worsened as a result of the pandemic. It will be important to keep this in mind for schemes and sponsors considering funding arrangements and, in particular, when analysing the value for money of bulk annuity or longevity swap transactions.”

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