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Public Sector Pension Funds in Australia: Longevity Selection and Liabilities

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  • Joelle H. Fong

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

  • John Piggott

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

  • 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)

Abstract

This paper assesses the cost and risk faced by public sector, defined benefit plan providers arising from uncertain mortality, including longevity selection, mortality improvements, and unexpected systematic shocks. Using longitudinal micro data on Australian pensioners, we quantify the extent of longevity selection at both aggregate and scheme level. We also show that as the age-membership structure in a pension scheme matures, scheme-specific longevity selection risk and systematic shocks become quantitatively more important and have larger consequences for plan liabilities than aggregate selection risk or the impact of mortality improvements.

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File URL: http://www.cepar.edu.au/media/83514/wp_17_public_sector_pension_funds_in_australia.pdf
File Function: First version, 2012
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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 201217.

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Length: 44 pages
Date of creation: May 2012
Date of revision:
Handle: RePEc:asb:wpaper:201217

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  1. Pablo Antolín, 2007. "Longevity Risk and Private Pensions," OECD Working Papers on Insurance and Private Pensions 3, OECD Publishing.
  2. John Beshears & James J. Choi & David Laibson & Brigitte C. Madrian, 2011. "Behavioral Economics Perspectives on Public Sector Pension Plans," NBER Working Papers 16728, National Bureau of Economic Research, Inc.
  3. Mario Cleves & William W. Gould & Roberto G. Gutierrez & Yulia Marchenko, 2010. "An Introduction to Survival Analysis Using Stata," Stata Press books, StataCorp LP, edition 3, number saus3, March.
  4. Dushi, Irena & Friedberg, Leora & Webb, Tony, 2010. "The impact of aggregate mortality risk on defined benefit pension plans," Journal of Pension Economics and Finance, Cambridge University Press, vol. 9(04), pages 481-503, October.
  5. Philip Clarke & Andrew Leigh, 2011. "Death, Dollars and Degrees: Socio‐economic Status and Longevity in Australia," Economic Papers, The Economic Society of Australia, vol. 30(3), pages 348-355, 09.
  6. Palacios, Robert & Whitehouse, Edward, 2006. "Civil-service pension schemes around the world," MPRA Paper 14796, University Library of Munich, Germany.
  7. Brown, Jeffrey R. & Clark, Robert & Rauh, Joshua, 2011. "The economics of state and local pensions," Journal of Pension Economics and Finance, Cambridge University Press, vol. 10(02), pages 161-172, April.
  8. Jeffrey R. Brown & Robert Clark & Joshua Rauh, 2011. "The Economics of State and Local Public Pensions," NBER Working Papers 16792, National Bureau of Economic Research, Inc.
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