LCP Warns of Potential Life Expectancy Inflection Point
Life expectancy trends in the UK may be reaching a turning point, a leading pension consultancy has warned. LCP, which boasts former Conservative Party and Liberal Democrats coalition government pension minister Sir Steve Webb among its legal partners, has issued a warning that emerging data over 2026 suggests the next update to the industry-standard CMI mortality projections model could result in further increases in life expectancy, potentially larger than in the previous two releases, depending on model calibration.
The CMI model is used widely by trustees and sponsors to set longevity assumptions. An ageing population will require either increased funding or major efficiency gains to maintain care standards, LCP has warned. If assumptions begin to move upwards again, schemes could see increased liabilities and upward pressure on pricing, particularly for longevity swaps and, over time, buy-ins.
Urgent Call for Review
LCP is urging pension schemes to review their longevity assumptions now, regardless of their endgame strategy. The consultancy warned: "Robust longevity assumptions are critical for assessing surplus and the extent to which it can be released. Schemes should check whether journey plans remain on track as views on longevity evolve." It also highlighted risk transfer timing: "If the market is at an inflection point, current conditions may represent an attractive window to hedge or transfer longevity risk."
Stuart McDonald, Partner and Head of Longevity and Demographic Insights at LCP, said: “After several years of falling life expectancies, the latest data suggests we could be at an inflection point. There is a real chance that future updates push life expectancy assumptions higher again. For pension scheme trustees and sponsors, that creates a clear need to stay close to the evidence and to understand how quickly pricing and funding positions could move.”
Impact on Liabilities and Pricing
Ben Rees, Partner at LCP, added: “Trustees and sponsors have become used to CMI updates lowering life expectancy. The last two models break that pattern, for many schemes, adopting the core model out of the box could significantly increase liabilities.” He noted that the outlook remains uncertain, with questions over NHS recovery and the long-term impact of developments such as anti-obesity drugs. Early evidence suggests benefits beyond weight loss, with potential to meaningfully improve long-term health outcomes, LCP found.
The warning comes as pension schemes face evolving demographic trends and economic pressures. LCP advises that proactive review of longevity assumptions can help schemes manage financial risks and ensure adequate funding for future obligations.
