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CIA final mortality tables released

On February 13, 2014, the Canadian Institute of Actuaries (CIA) published the final report and tables on Canadian Pensioners’ Mortality. The report was published after considering comments from approximately 30 varying sources on the July 31, 2013 draft Canadian Pensioners’ Mortality Report.

The final report includes three new sets of mortality tables (collectively known as the CPM2014 tables):

  • The CPM2014 tables – developed using the experience from all plans included in the RPP study;
  • The CPM2014Publ tables – developed using public sector data only; and
  • The CPM2014Priv tables – developed using private sector data only.

The report also includes two sets of improvement scales: CPM-B (2-dimensional) and CPM-B1D2014 (1-dimensional), the latter representing an acceptable approximation for a couple of years, allowing some software to be adapted. The new tables and scales vary from those published in draft form in July of 2013 (see our News & Views issue of September 2013 (PDF)) although perhaps not as extensively as anticipated.

The table below compares the cost of providing an immediate life annuity of $1 (based on a 4% discount rate) under the new CPM2014 tables versus the tables currently being used for the purposes of determining commuted values (i.e. the UP-94 generational tables).

Mortality Tables

What is the same in the Final Report as in the Draft Report:

  • The table subsets remain differentiated between the public sector and the private sector. Even though some comments were submitted to ask for different tables for blue, white, or mixed collar, the subcommittee’s efforts to classify the data by collar type did not produce acceptable results.
  • While numerous objections to size adjustments were raised, the subcommittee felt that the correlation between mortality and pension size was sufficiently strong to continue to include the size adjustment factors to be used when deemed warranted by the actuary. While the adjustment factors have changed, they are relatively similar for most monthly income ranges. The final report does provide some additional information that was absent from the draft report on when and how the size adjustment factors may be used.
  • No beneficiary or active life data was incorporated in the construction of the tables. While the subcommittee agrees that including such data would be beneficial, the quality of the data was not acceptable for use in the construction of these tables.

What is different between the Final Report and the Draft Report:

  • The final tables are based on two additional private sector data contributors.
  • The data used was weighted for industry by each industry’s proportion of membership in Canadian defined benefit pension plans.
  • The assumptions for the ultimate mortality improvement rates (for 2030 and after) were updated to reflect the recent actuarial valuation for the Canada Pension Plan.

The final report is consistent with the draft report in concluding that Canadians covered by a defined benefit pension plan are living longer than projected under UP94-Generational and mortality improvements are likely to accelerate faster than previously anticipated. However, while the new private tables generally reflect lower mortality than the draft tables published in July of 2013, both the public and combined table reflect higher mortality at the majority of ages. The following table demonstrates the increase (decrease) in life annuity values, from the draft report to the final report.

Life Annuity Values

The changes in the improvement scale, which impacted present values by only 0.1% to 0.3%, were less significant than the other changes mentioned above.

It should be noted that in the absence of credible mortality experience that indicates otherwise, the new tables represent the best estimate of mortality for use in funding or accounting valuations of most Canadian pension plans. Some plans had already reflected certain changes in their valuation last year.

These mortality tables will not affect the solvency position of pension plans or transfer values that may be payable upon termination until such time as the Actuarial Standards Board makes changes to the Standards of Practice on Pension Commuted Values. At that time we will see increases in both commuted values and solvency funding requirements.