Using best estimate life expectancies: why it matters for employers

Using best estimate life expectancies: why it matters for employers

23 Oct 2025

This month’s edition of XPS Express for employers, explores the latest industry life expectancy model, which is now available for employers to use to calculate their pension liabilities. This updated model projects longer life expectancies overall compared to last year. Adopting the model without tailoring the inputs may result in an inaccurate balance sheet position and potential overfunding.

Employers can obtain best estimate life expectancies for their scheme member’s which can then be used for accounting, funding and to better assess future cashflow requirements.

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Key developments: at a glance

• The latest industry life expectancy model (CMI 2024) has recently been released. Employers usually update their pensions liability figures used for accounting purposes for the latest model each year.
   
• Within CMI 2024, the impact of the COVID-19 pandemic has now been fully integrated into future life expectancy projections. Despite this, CMI 2024 shows an increase in life expectancies for the average scheme, with older members expected to live longer than previously expected.
   
• Modern analyses allow easier assessment of best estimate life expectancy for schemes, helping to mitigate risks of overfunding, gain a better understanding of the cost of insurance and better hedge scheme cashflows.
   
• Adopting this model without tailoring the inputs may add unnecessary prudence to a scheme’s liabilities, as life expectancies across the membership will vary depending on a variety of factors, such as household income and age.

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