Lifetime mortgages

Chapter 9: Lifetime mortgages: product disclosure

Notes provided by the CMI to assist the calculation of life expectations required under MCOB 9.4.6R(5)

The FSA’s Conduct of Business sourcebook for mortgages (MCOB) came into force on 31 October 2004. Amongst other things, this sets out, in Chapter 9, the rules relating to product disclosure for lifetime mortgages (also known as equity release schemes), including benefit illustrations.

We are receiving a number of requests for information regarding the mortality tables to be used in these illustrations for estimating the term of lifetime mortgages. This basis is described in Section 9.4.10 of MCOB. In particular, this refers to:

"PMA92(C=2010) and PFA92(C=2010) for males and females respectively,…"

These tables can be derived from the information in CMI Report 17, by applying the projection factors described in Section 6 to the PMA92Base and PFA92Base mortality rates set out in Appendix A5. (Tables projected to calendar year 2020 are given in Appendix A10, which can be used as a check on the method of calculation.)

The PMA92(C=2010) and PFA92(C=2010) tables were not published directly in CMI Report 17, but were published in a volume entitled "Standard Tables of Mortality: The "92" Series". This volume can be purchased from the eShop of the actuarial profession.

As a courtesy, the PMA92(C=2010) and PFA92(C=2010) tables are provided here as Excel spreadsheets, for free download.

This spreadsheet contains, for each age and sex, the mortality rates from the relevant table together with the CMI’s calculation of the complete expectation of life from that table. The CMI accepts no responsibility for the use of these tables and cannot enter into correspondence about them.

The users of this information should be aware that considerable uncertainty exists in any forecast of future mortality. At the moment it is not possible to quantify this uncertainty. The FSA has chosen to specify the above mortality tables for the purposes of MCOB 9.4. The CMI and the actuarial profession give no advice about the suitability of these tables for that or any other purpose. These tables are not the most up-to-date issued by the CMI for use by actuaries and, for example, do not take account of the latest research on the cohort effect.

It should also be borne in mind that mortality tables are, by their very nature, based on the average mortality experience of large populations. As such, they are extremely unlikely to predict the experience of an individual. Even if a mortality table turns out to be “correct” in aggregate, the resulting expectation of life will be too low for 50% (and too high for the other 50%) of all individuals.