Shifts in life expectancy could mean a significant funding reduction for defined benefit (DB) schemes, LCP has said, although sponsors and trustees have been urged to be cautious amid concern that future trends remain "very uncertain" following the impact of Covid-19.

The firm explained that although the year started well, with winter and spring months experiencing the lowest level of deaths in a decade across England and Wales, mortality rates have increased since June, reaching the highest rate for 10 years, Covid-19 years aside.

If this trend continues to the end of the year, mortality rates in England and Wales in 2022 could be around 5 per cent higher than pre-pandemic 2019, according to LCP's analysis, equating to around thirty thousand additional deaths.

Furthermore, if this data is reflected in the next CMI model, due to be published next year, life expectancies could fall by around nine months, which, according to LCP, would equate to a £100m lower funding requirement for a £3bn scheme.

The firm also predicted that high mortality rates will continue for several years given the wider indirect impacts of the pandemic on the nation’s general health, noting that while Covid deaths remain relatively low, the wider repercussions of the pandemic are still emerging, such as late diagnosis and treatment of diseases, and the growing NHS backlog.

However, LCP acknowledged that it is currently unclear how much weight will be placed on the latest data, suggesting that the CMI may still decide, as they did in 2020 and 2021, that 2022 is still abnormal and not fully include it in their core model.

The firm has therefore urged sponsors and trustees to think carefully when adopting the next CMI model, warning that future trends are still very uncertain.

LCP partner, Chris Travener, stated: “The trends over 2022 adds to the evidence that there are ongoing ramifications of the pandemic. Whether we are seeing the commencement of a new era and the current high rates of mortality will become the new normal for years to come is still very much unknown.

“If it is, then it could mean more schemes are further along their journey plans towards full funding or buyout, deficit contributions being cut and company balance sheets improved.”

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