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Apart from being potentially outdated, there was a concern that the U.S. pensioner experience was not necessarily reflective of the Canadian experience.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.

Copyright © 2019 Transcontinental Media G.P. Originally published on benefitscanada.com

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Cliff McKay:

Media reports (Globe&Mail 10 May) state that recent investment returns have been so good, that many defined benefit pensions are now so well funded, that they are shifting investments from high-rate-but-relatively-riskier to low-return-but-safer options. Yet, after two years of outstanding investment returns, the plan of which I am a member cites (both years!) obligatory changes in actuarial assumptions as the reason that plan is still mired in its unfunded liability problem. This discrepancy leaves me wondering why so many plans seem to be solving their unfunded liability problems while others are not. Don’t “changed actuarial assumptions” apply to all pension funds?
Thanks for the assistance you can provide me in trying to understand this discrepancy.

Monday, May 26 at 7:09 pm | Reply

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