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Managing Systematic Mortality Risk with Group Self Pooling and Annuitisation Schemes

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Author Info

  • Chao Qiao

    ()
    (PricewaterhouseCoopers Australia)

  • Michael Sherris

    ()
    (School of Risk and Actuarial Studies and ARC Centre of Excellence in Population Ageing Research, Australian School of Business, University of New South Wales)

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    Abstract

    Group Self-annuitisation Schemes (GSAs), or Pooled Annuity Schemes, are designed to share uncertain future mortality experience including systematic improvements. They have been proposed because of the significant uncertainty of future mortality improvement on pension and annuity costs. The challenges for designing group pooled schemes include the decreasing average payments when mortality improves significantly, the decreasing numbers in the pool at the older ages and the dependence of systematic mortality improvements across different ages of members in the pool.

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    File URL: http://cepar.edu.au/media/48700/Managing%20Systematic%20Mortality%20Risk%20with%20Group.pdf
    File Function: First version, 2011
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    Bibliographic Info

    Paper provided by ARC Centre of Excellence in Population Ageing Research (CEPAR), Australian School of Business, University of New South Wales in its series Working Papers with number 201104.

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    Length: 28 pages
    Date of creation: Mar 2011
    Date of revision:
    Handle: RePEc:asb:wpaper:201104

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    Related research

    Keywords: Group self-annuitisation; pooled annuity; longevity risk; extreme value distribution; Gompertz-Makeham mortality;

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    References

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    1. Friedman, Benjamin M & Warshawsky, Mark J, 1990. "The Cost of Annuities: Implications for Saving Behavior and Bequests," The Quarterly Journal of Economics, MIT Press, vol. 105(1), pages 135-54, February.
    2. Rocha, Roberto & Vittas, Dimitri, 2010. "Designing the payout Phase of pension systems : policy issues, constraints and options," Policy Research Working Paper Series 5289, The World Bank.
    3. Olivia S. Mitchell, 2001. "Developments in Decumulation: The Role of Annuity Products in Financing Retirement," NBER Working Papers 8567, National Bureau of Economic Research, Inc.
    4. John Piggott & Emiliano A. Valdez & Bettina Detzel, 2005. "The Simple Analytics of a Pooled Annuity Fund," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 72(3), pages 497-520.
    5. Stamos, Michael Z., 2008. "Optimal consumption and portfolio choice for pooled annuity funds," Insurance: Mathematics and Economics, Elsevier, vol. 43(1), pages 56-68, August.
    6. Vittas, Dimitri & Rudolph, Heinz & Pollner, John, 2010. "Designing the payout phase of funded pension pillars in central and eastern European countries," Policy Research Working Paper Series 5276, The World Bank.
    7. Andrew B. Abel, 1985. "Capital Accumulation and Uncertain Lifetimes with Adverse Selection," NBER Working Papers 1664, National Bureau of Economic Research, Inc.
    8. Valdez, Emiliano A. & Piggott, John & Wang, Liang, 2006. "Demand and adverse selection in a pooled annuity fund," Insurance: Mathematics and Economics, Elsevier, vol. 39(2), pages 251-266, October.
    9. Benjamin M. Friedman & Mark Warshawsky, 1985. "The Cost of Annuities: Implications for Saving Behavior and Bequests," NBER Working Papers 1682, National Bureau of Economic Research, Inc.
    10. Hurd, Michael D, 1989. "Mortality Risk and Bequests," Econometrica, Econometric Society, vol. 57(4), pages 779-813, July.
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