At its meeting in late August 2026, the Actuarial Standards Board (ASB) of the Canadian Institute of Actuaries (CIA) decided to make the use of new mortality tables mandatory when calculating commuted values for all pension plans subject to actuaries’ Standards of Practice (SOP).

Effective April 1, 2027, the base mortality table, known as the combined 2024 Canadian Pensioner Mortality table (CPM 2024), along with the MI-2024 improvement scale, together replace the current CPM2014 combined mortality table projected using the CPM-B improvement scale. This, according to Eckler Ltd, which explains the changes in its October special notice, New mortality assumptions finalised for pension commuted values effective April 1, 2027.

The update comes outside of the five-year cycle in which the SOP is updated – its next review is slated for 2027.

The table and improvement scale are based on research commissioned by the CIA.

“The researchers did their work. They did a very good job. It was reviewed by a taskforce, and the task force agreed it should be the basis of the new mortality table. We consulted our members and we consulted the regulators,” says Michel St-Germain, chair of the taskforce issuing the new standards and past president of the CIA.

Accounts for mortality associated with COVID-19

The mortality table’s research reflects mortality experience observed up to the end of 2021, along with an extended observation period to the end of 2023 for a subset of the data. The CIA’s memorandum on the subject adds that the calibration of CPM2024 explicitly accounts for mortality associated with the COVID-19 pandemic.

“The designated group concluded that, on balance, updating the mortality table is appropriate, as it is important to stakeholders to have confidence that the mortality tables used in commuted value calculations are based on the most recent research and analysis,” the CIA adds.

The MI-2024 scale, meanwhile, is based on mortality data obtained from the Human Mortality Database through 2019.

“The MI-2024 improvement scale represents a robust approach to recognizing mortality improvement. The long-term mortality improvement assumption underlying MI-2024 was determined using statistical techniques that extrapolate historical mortality improvements into the future,” the memorandum explains. “The models selected by researchers place greater weight on more recent experience. Future mortality improvement rates are highly uncertain.”

Uncertainty in mortality projections

That uncertainty stems from the fact that researchers who are looking at history to forecast into the future, have two conflicting trends to contend with, St-Germain explains. New drugs and technological improvements are expected to prolong life, while the huge gains observed in cancer survival rates are expected to slow down. “They will continue to improve, but at a lower rate,” he says. “This is a bit of a controversial issue because forecasting mortality improvements, future mortality improvements, is not easy to do.”

Higher commuted values

In short, the new changes mean that members of defined benefit plans who terminate employment will see an increase in the value of the pension if they choose to commute, he adds. “The major difference is that we’re assuming the rate of improvement in mortality will be higher than expected, higher than it was assumed in the past.”

The result it produces is an increase in value resulting from different mortality assumptions between two per cent and six per cent. For public servants taking commuted value lumpsums, sometimes exceeding $1 million, he points out that four per cent is $40,000. “We’re talking about a big impact here for certain individuals,” he adds.

Financial implications for pension plans

“The new mortality basis reflects longer life expectancies than the current prescribed basis. As a result, commuted values will generally increase, all else being equal,” Eckler’s notice states. “For plans, the effect on cashflows, plan liabilities, funded position and contribution requirements will vary depending on the plan’s provisions, valuation basis, demographics and the number of members who elect lump-sum settlements.”

They add that the new mortality basis will produce a noticeable one-time increase in commuted values, all else being equal. “It may also affect actuarial liabilities and projections where benefits are expected to be settled through lump-sum payments.” The Eckler notice also includes a checklist of implementation considerations for plan sponsors and administrators ahead of the April 2027 deadline. (The standards board initially recommended a February 1 implementation date, which was ultimately extended, based on feedback during consultation periods.)

The CIA’s memorandum on the subject notes that the SOP requires the standards board to promulgate a mortality table for commuted value calculations “from time to time.” St-Germain says the last time the standards board went outside of the five-year review period to make a SOP update of the kind was in 2014, followed by another attempt to make changes in 2017, which was rejected by members.

“Just to reinforce the point that we consult people,” he notes, adding that no one has objected to the use of the new tables and assumptions. “If our members say no, not good enough, we won’t do it.”