Longevity improvement rates for US DB pension plan participants

Examining widening life expectancy inequality

​Inequality in life expectancy in the US is increasing. Recent analysis by the Society of Actuaries has shown that mortality improvements since the 1980s have been far greater for the counties with the highest socio-economic status in the US compared to those with the lowest. But how much will this growing inequality affect participants of defined benefit pension plans?

29 July 2021

Club Vita’s new research shows that defined benefit (DB) pension plan participants have recently experienced much higher mortality improvements than the general US population (around 0.8% per year higher among over 65-year-olds). If this continues, the existing gap between DB pension plan participants and the US population will widen by around 1 more year by the late 2020s. 

This raises the question of whether improvement scales calibrated to population level data (such as the Society of Actuaries’ MP scale) should be adjusted when projecting mortality rates for DB pension plan participants.

This growing inequality also highlights the need to capture the diversity of individual experience when estimating baseline mortality rates for pension plans. 

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