Ottawa, ON (Feb. 14, 2014) – The Canadian Institute of Actuaries (CIA) has issued the first-ever mortality tables and mortality improvement scales that are based on Canadian pensioner mortality experience.
Defined benefit pension plans need dependable information to ensure that contributions to the plans from employees and employers are appropriate to fulfil the pension promise made by the plan sponsor. Consequently, actuaries that work with defined benefit plans must develop assumptions about the mortality of plan members to assess what contributions are necessary, and what pension liability rests on the sponsor.
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 Apart from being potentially outdated, there was a concern that the U.S. pensioner experience was not necessarily reflective of Canadian experience. The Institute decided that it was time 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 US 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, while 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 indicates 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. These increases in assumed life expectancy are significant.
The financial impact of adopting the new tables may vary considerably between pension plans. Reported pension obligations could increase by as much as 7 percent or more for some plans but, more typically, increases may be in the range of 3-4 percent. For pension plans which are already reflecting their own mortality experience, the potential increase in pension obligations may be lower again perhaps in the 1-2 percent range.
The President of the Institute, Jacques Lafrance, said: “These new mortality tables will, for the first time, allow CIA members to use tools that solely reflect Canadian pensioner mortality experience. This will allow actuaries to provide even more reliable calculations and estimates for the users of their services.”
M. Lafrance added: “The new tables are the culmination of over four years of work. In 2009 we commissioned two studies, one of which looked at the experience of pensioners under the Canada and Quebec Pension Plans and another which reviewed the experience of a number of Canadian public and private sector pension plans.
“The resultant mortality table and mortality improvement scale are a significant development for Canadians and employers, and the actuarial profession is proud to present these all-new, all-Canadian tools for immediate use.”
About the Canadian Institute of Actuaries
The Canadian Institute of Actuaries is the national organization and voice of the actuarial profession. The Institute is dedicated to serving the public through the provision, by the profession, of actuarial services and advice of the highest quality. In fact, the Institute holds the duty of the profession to the public above the needs of the profession and its members.
Source: Canadian Institute of ActuariesTags: actuaries