The implications of mortality heterogeneity on longevity sharing retirement income products

The implications of mortality heterogeneity on longevity sharing retirement income products

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Speaker: Andrés Villegas

In the context of population aging, various types of longevity sharing retirement income products have been recently proposed. Those alternative products enable individuals to insure their idiosyncratic mortality risk while pooling systematic mortality risk. Examples of this products include group self-annuitisation schemes, pooled annuity funds and retirement income tontines. However, mortality rates differ across sub-populations - for example, defined by gender, geographic area, or socio-economic variables - posing a challenge to the successful implementation of such mortality pooling arrangements. The impact of differential mortality on the redistribution properties of both defined benefit and defined contribution pension schemes has been widely studied. For instance, it has been shown that differential mortality can induce an undesirable transfer of wealth away from lower socio-economic groups with shorter life expectancy to higher socio-economic groups with above average longevity. In this paper, we analyse and contrast the redistribution properties of various longevity sharing retirement income products for pools with heterogeneous mortality.

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