Is the indirect impact of COVID-19 now the biggest risk pension schemes should consider?

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Holidays to France and other destinations were cancelled or cut short for many this year (including me) because of quarantine requirements and fears of COVID-19 infection. A fear of infection is real given France’s (and other countries) infection rate is now creeping beyond the first wave in March and April (now around 7,500 new cases a day). In the first wave, COVID-19 related deaths started to be reported two weeks after the infection rate started to climb. France’s infection rate started to climb in the current wave about a month and a half ago but COVID-19 related deaths remain very low. UK infection rates since easing measures were introduced have been rather more muted but again the number of deaths remain very low.

So what is going on? More testing? Testing of different groups? Less caution only for the younger and healthier groups with the vulnerable continuing to take care? A less deadly virus strain? More immunity? A greater understanding of the virus and how to treat those that are seriously ill? Less people vulnerable to COVID-19 now? So many questions and not enough data to answer them all yet although Public Health England is reporting that most infections are now in the younger least vulnerable groups:

Confirmed cases in England from 8 August 2020 to 21 August 2020

Source: Public Health England

To add to the picture we can consider deaths relating to other causes. Up to date all cause death data for France is not available but data for England, Wales and Scotland it is available to 21 August. This data shows that for the last two weeks the number of deaths for all causes has risen above 2019 levels when it has been below 2019 levels for much of the period since mid June (see our XPS COVID-19 Tracker). It’s too soon to tell whether this is a trend, but there is a risk that it is the indirect impact of COVID-19 on other members of society (such as those whose operations have been delayed) might have a significant impact on future deaths.

Our approach is to analyse future data as it arrives every week via our XPS COVID-19 Tracker and to model the direct and indirect impact of COVID-19 on pension scheme funding in various future scenarios using our XPS COVID-19 Impact Analytics. An understanding of the full range of potential longevity impacts, as well as financial impacts, is essential before key funding and investment decisions are made.

To view our XPS COVID-19 Impact Analytics and videos, click here.