Funded and private pensions

Mortality Assumptions and Longevity Risk

Implications for pension funds and annuity providers

Published on December 08, 2014

book

Pension funds and annuity providers need to effectively manage the longevity risk they are exposed to. Individuals receiving a lifetime income may live longer than expected or accounted for in the actuarial calculations to provision for these liabilities. Mismanaged longevity risk can deteriorate finances, cause bankruptcy and expose individuals to the risk of losing their retirement income. To safeguard against this risk, pension funds and annuity providers must provision for future improvements in mortality and life expectancy. The regulatory framework can support the effective management of longevity risk.

This publication assesses how pension funds, annuity providers such as life insurance companies, and the regulatory framework account for future improvements in mortality and life expectancy. The study then examines the mortality tables commonly used by pension funds and annuity providers against several well-known mortality projection models with the purpose of assessing the potential shortfall in provisions. The final part of the publication identifies best practices and discusses the management of longevity risk, putting forward a set of policy options to encourage and facilitate the management of longevity risk.

 

TABLE OF CONTENTS

Foreword
Executive summary
Mortality assumptions used by pension funds and annuity providers
Overview of countries' mortality tables
Trends in life expectancy and mortality improvements: Implications for pension funds and annuity providers
Measuring and modelling mortality and life expectancy: Methods and limitations
Assessment of the potential longevity risk in the standard mortality tables
Policy options for managing longevity risk
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8 December 2014

News release - Economic stagnation compounds demographic pressure on pension systems, says OECD

Insights blog - A prayer for your pension

Launch event - The 2014 OECD Pensions Outlook and the findings in this study were presented at a launch event at the Cass Business School in London.

 

Further reading

Pensions Markets in Focus

Global Pensions Statistics

Pensions at a Glance

Mortality and Life Expectancy - Longevity Risk

Retirement savings adequacy