The Canadian Institute of Actuaries (CIA) has issued the first-ever mortality tables and mortality improvement scales that are based on pensioner mortality experience in this country.
“This will allow actuaries to provide even more reliable calculations and estimates for the users of their services,” says CIA president Jacques Lafrance.
Prior to today, Canadian pension actuaries could access primarily U.S.-based pension mortality tables to help them arrive at their assumptions. Many larger pension plans have derived mortality assumptions from their own experience, but many other plans have used the U.S. standard tables published in 1994.
Apart from being potentially outdated, there was a concern that the U.S. pensioner experience was not necessarily reflective of the Canadian experience. The CIA decided to collect the data necessary to create up-to-date Canadian pensioner mortality tables.
The new studies show that Canadian pensioner mortality has improved significantly faster than projected by the commonly used U.S. standard tables in recent years. As a result, the new tables indicate current mortality rates lower than those previously projected and that future rates of mortality improvement will be higher than those previously assumed.
Using the old U.S. standard mortality table and improvement scale, a 65-year-old man in 2014 has a life expectancy of 19.8 years; with the new mortality table and improvement scale, his life expectancy is 22.1 years. For a 65-year-old woman in 2014, the old U.S. standard mortality table and improvement scale indicate a life expectancy of 22.1 years, while with the new mortality table and improvement scale her life expectancy is increased to 24.4 years.
The CIA says the financial impact of adopting the new tables may vary considerably between pension plans.
Reported pension obligations could increase by as much as 7% or more for some plans, but, more typically, increases may be in the range of 3% to 4%. For pension plans that are already reflecting their own mortality experience, the potential increase in pension obligations may be lower again, perhaps in the 1% to 2% range.
“The resultant mortality table and mortality improvement scale are a significant development for Canadians and employers,” he explains, “and the actuarial profession is proud to present these all-new, all-Canadian tools for immediate use.”
For more, read the Canadian Pensioners’ Mortality report on the CIA website.