1887

OECD Working Papers on Insurance and Private Pensions

Selected studies on insurance and private pensions policy prepared for use within the OECD and addressing such policy issues as risk management, governance, types of investments, and benefit protection. This working papers series has been discontinued; it is superseded by ‘OECD Working Papers on Finance, Insurance and Private Pensions’ available via: http://dx.doi.org/10.1787/20797117.

English

Longevity Risk and Private Pensions

This paper examines how uncertainty regarding future mortality and life expectancy outcomes, i.e. longevity risk, affects employer-provided defined benefit (DB) private pension plans liabilities. The paper argues that to assess uncertainty and associated risks adequately, a stochastic approach to model mortality and life expectancy is preferable because it permits to attach probabilities to different forecasts. In this regard, the paper provides the results of estimating the Lee-Carter model for several OECD countries. Furthermore, it conveys the uncertainty surrounding future mortality and...

English

Keywords: histograms, longevity risk, Lee-Carter models, life tables, mortality and life expectancy, demographic trends and forecasts, private pensions, Monte Carlo methods, defined benefit pension plans., retirement
JEL: C15: Mathematical and Quantitative Methods / Econometric and Statistical Methods and Methodology: General / Statistical Simulation Methods: General; J32: Labor and Demographic Economics / Wages, Compensation, and Labor Costs / Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions; J26: Labor and Demographic Economics / Demand and Supply of Labor / Retirement; Retirement Policies; J11: Labor and Demographic Economics / Demographic Economics / Demographic Trends, Macroeconomic Effects, and Forecasts; G23: Financial Economics / Financial Institutions and Services / Pension Funds; Non-bank Financial Institutions; Financial Instruments; Institutional Investors; C32: Mathematical and Quantitative Methods / Multiple or Simultaneous Equation Models; Multiple Variables / Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
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