Implications for pension funds and annuity providers
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
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.