Indexing pensions to life expectancy: Keeping the system fair across generations

Mercedes Ayuso, Jorge Miguel Bravo

Research output: Chapter in Book/Report/Conference proceedingConference contributionpeer-review

Abstract

Linking pensions to longevity developments and population ageing is one of the most common types of automatic adjustment mechanisms in pension schemes. Although this reform approach is primarily driven by cost-containment objectives, other dimensions of welfare restructuring are present, including pension adequacy, recalibration, introducing economic and actuarial rationality, recommodification, and blame avoidance for unpopular policies that involve retrenchments. This paper discusses how to index pensions to longevity developments and population ageing in a way that is consistent with actuarial fairness and neutrality across generations. We derive an intergenerational fairness and neutrality condition for pension reform and examine alternative policy options including modifying the contribution rate, updating the statutory retirement age, or introducing sustainability factors.
Original languageEnglish
Title of host publicationMathematical and Statistical Methods for Actuarial Sciences and Finance
Subtitle of host publicationMAF 2022
EditorsMarco Corazza, Cira Perna, Claudio Pizzi, Marilena Sibillo
PublisherSpringer International Publishing
Chapter6
Pages31-37
ISBN (Electronic)978-3-030-99638-3
ISBN (Print)978-3-030-99637-6
DOIs
Publication statusPublished - 12 Apr 2022
EventInternational Conference Mathematical and Statistical Methods for Actuarial Sciences and Finance

- University of Salerno, Salerno, Italy
Duration: 20 Apr 202222 Apr 2022
Conference number: 10th
https://sites.google.com/unisa.it/maf2022/home-page

Conference

ConferenceInternational Conference Mathematical and Statistical Methods for Actuarial Sciences and Finance

Abbreviated titleMAF2022
Country/TerritoryItaly
CitySalerno
Period20/04/2222/04/22
Internet address

Keywords

  • Automatic adjustment mechanisms
  • Life expectancy
  • Pensions
  • Actuarial fairness
  • Risk-sharing
  • Longevity risk

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