Funded and private pensions

Mortality and Life Expectancy - Longevity Risk


The OECD and its Working Party on Private Pensions (WPPP) began in 2006 work on assessing the impact for saving for retirement, funded pension plans and insurance companies providing annuity products of mortality and life expectancy assumptions, and longevity risk.

In 2012 the OECD began research to assess how pension funds, annuity providers and the regulatory framework account for future improvements in mortality and life expectancy;  secondly, to examine 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; and thirdly, to identify best practices and assess the different practices to manage longevity risk.

In 2015, the OECD and its WPPP began looking into the differences in life expectancy and mortality rates around retirement age across different socio-economic groups in selected OECD countries. These differences may lead two individuals of different socioeconomic groups retiring at the same age to expect very different lengths of retirement.

The OECD has gathered evidence on these differences and it is assessing the potential implications of these differences. The difference in life expectancy and mortality rates across different socio-economic groups can be not only in current levels, but also differences in the gradient of increase. The evidence in countries were data is available suggests that those in higher socioeconomic groups have benefited from much larger increases in life expectancy over the last few decades than those in the lower socioeconomic groups.

These differences present challenges for pension funds and insurance companies to measure and manage their longevity risk. They also present opportunities to better serve society’s financial needs for retirement through increased market segmentation. Different segments of the population have different needs with respect to financing their retirement. Product innovation should increasingly adapt to meet these diverse needs. Enhanced annuities, for example, have emerged as a solution to provide higher incomes to more disadvantaged groups that have lower life expectancy (higher mortality rates). Other types of products could be structured to provide bespoke solutions for the different segments of society

In 2016, the OECD will to continue working on the impact of differences in life expectancy and mortality rates across across different socio-economic groups and assess the potential impact on retirement income and annuity providers, examining different retirement paths and products.

Longevity risk is a very long-term risk. Its impact runs from the time an individual joins a pension fund, let’s say age 25, until s/he passes away, around age 80-90. Consequently, assumptions allowing for future improvements in mortality and life expectancy need to run for around 60 years at least.


Mortality Assumption and Longevity Risk: Implications for Pension Funds and Annuity Providers, 2014

A Policy Roadmap for Defined Contribution Pensions, 2012

Ageing and the Payout Phase of Pensions, Annuities and Financial Markets, 2008

Governments and the Market for Longevity-Indexed Bonds, 2007

Longevity Risk and Private Pensions, 2007



Pensions Outlook


Pension Markets in Focus


Retirement savings adequacy


Global pension statistics


Pensions at a Glance



Pablo Antolin
+33-1 45 24 90 86 [email protected]


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