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Getting life expectancy estimates right for pension policy: period versus cohort approach

Author

Listed:
  • Ayuso, Mercedes
  • Bravo, Jorge M.
  • Holzmann, Robert

Abstract

In many policy areas it is essential to use the best estimates of life expectancy, but it is vital to most areas of pension policy. This paper presents the conceptual differences between static period and dynamic cohort mortality tables, estimates the differences in life expectancy for Portugal and Spain, and compares official estimates of both life expectancy estimates for Australia, the United Kingdom, and the United States for 1981, 2010, and 2060. These comparisons reveal major differences between period and cohort life expectancy in and between countries and across years. The implications of using wrong estimates for pension policy, including financial sustainability, are explored.

Suggested Citation

  • Ayuso, Mercedes & Bravo, Jorge M. & Holzmann, Robert, 2021. "Getting life expectancy estimates right for pension policy: period versus cohort approach," Journal of Pension Economics and Finance, Cambridge University Press, vol. 20(2), pages 212-231, April.
    • Handle: RePEc:cup:jpenef:v:20:y:2021:i:2:p:212-231_3
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    Cited by:

    1. Cláudia Simões & Luís Oliveira & Jorge M. Bravo, 2021. "Immunization Strategies for Funding Multiple Inflation-Linked Retirement Income Benefits," Risks, MDPI, vol. 9(4), pages 1-28, March.
    2. Bravo, Jorge M. & Ayuso, Mercedes & Holzmann, Robert & Palmer, Edward, 2023. "Intergenerational actuarial fairness when longevity increases: Amending the retirement age," Insurance: Mathematics and Economics, Elsevier, vol. 113(C), pages 161-184.
    3. Serena Vigezzi & Cosmo Strozza, 2024. "Differences in mortality before retirement: The role of living arrangements and marital status in Denmark," Demographic Research, Max Planck Institute for Demographic Research, Rostock, Germany, vol. 50(20), pages 515-546.
    4. Keivan Diakite & Pierre Devolder, 2021. "Progressive Pension Formula and Life Expectancy Heterogeneity," Risks, MDPI, vol. 9(7), pages 1-19, July.
    5. Bravo, Jorge Miguel & Ayuso, Mercedes & El Mekkaoui, Najat, 2025. "Assessing the effectiveness of recent pension reforms: The French experiment," Socio-Economic Planning Sciences, Elsevier, vol. 102(C).
    6. Bernd Genser & Robert Holzmann, 2019. "National Pension Policy and Globalization: A New Approach to Strive for Efficient Portability and Equitable Taxation," Working Paper Series of the Department of Economics, University of Konstanz 2019-04, Department of Economics, University of Konstanz.
    7. Ulla Bauer, 2025. "Disclosure determinants in corporate reporting: Testing the significance of financial and pension variables," International Journal of Research in Business and Social Science (2147-4478), Center for the Strategic Studies in Business and Finance, vol. 14(10), pages 174-183, December.
    8. József Banyár, 2021. "The Outlines of a Possible Pension System Funded with Human Capital," Risks, MDPI, vol. 9(4), pages 1-32, April.
    9. Bravo, Jorge Miguel & Ayuso, Mercedes & Holzmann, Robert, 2019. "Making Use of Home Equity: The Potential of Housing Wealth to Enhance Retirement Security," IZA Discussion Papers 12656, IZA Network @ LISER.
    10. Bravo, Jorge M. & Ayuso, Mercedes & Holzmann, Robert & Palmer, Edward, 2021. "Addressing the life expectancy gap in pension policy," Insurance: Mathematics and Economics, Elsevier, vol. 99(C), pages 200-221.
    11. Jorge de Andrés-Sánchez & Laura González-Vila Puchades, 2025. "Longevity Risk and Annuitisation Decisions in the Absence of Special-Rate Life Annuities," Risks, MDPI, vol. 13(2), pages 1-27, February.
    12. Jesús-Adrián Álvarez & Malene Kallestrup-Lamb & Søren Kjærgaard, 2020. "Linking retirement age to life expectancy does not lessen the demographic implications of unequal lifespans," CREATES Research Papers 2020-17, Department of Economics and Business Economics, Aarhus University.
    13. Holzmann, Robert & Alonso-García, Jennifer & Labit-Hardy, Heloise & Villegas, Andres M., 2017. "NDC Schemes and Heterogeneity in Longevity: Proposals for Redesign," IZA Discussion Papers 11193, IZA Network @ LISER.
    14. Samuel Asante Gyamerah & Janet Arthur & Saviour Worlanyo Akuamoah & Yethu Sithole, 2023. "Measurement and Impact of Longevity Risk in Portfolios of Pension Annuity: The Case in Sub Saharan Africa," FinTech, MDPI, vol. 2(1), pages 1-20, January.
    15. repec:osf:osfxxx:8wbdv_v1 is not listed on IDEAS
    16. Cespedes, Luis & Santolino, Miguel & Ayuso, Mercedes, 2025. "The monetary injury risk value of a crashed vehicle: a gender driving analysis," Research in Transportation Economics, Elsevier, vol. 113(C).
    17. Fabrizio Culotta, 2021. "Life Expectancy Heterogeneity and Pension Fairness: An Italian North-South Divide," Risks, MDPI, vol. 9(3), pages 1-22, March.
    18. Giovanna Apicella & Emilia Di Lorenzo & Gabriella Piscopo & Marilena Sibillo, 2025. "Lee–Carter model: assessing the potential to capture gender-related mortality dynamics," Decisions in Economics and Finance, Springer;Associazione per la Matematica, vol. 48(2), pages 1065-1092, December.
    19. Mercedes Ayuso & Jorge M. Bravo & Robert Holzmann & Edward Palmer, 2021. "Automatic Indexation of the Pension Age to Life Expectancy: When Policy Design Matters," Risks, MDPI, vol. 9(5), pages 1-28, May.
    20. Filipe Costa Souza & Wilton Bernardino & Silvio C. Patricio, 2024. "How life-table right-censoring affected the Brazilian social security factor: an application of the gamma-Gompertz-Makeham model," Journal of Population Research, Springer, vol. 41(3), pages 1-38, September.
    21. Strozza, Cosmo & Vigezzi, Serena & Callaway, Julia & Kashnitsky, Ilya & Aleksandrovs, Aleksandrs & Vaupel, James W, 2022. "Socioeconomic inequalities in survival to retirement age or shortly afterwards: a register-based analysis," OSF Preprints 8wbdv, Center for Open Science.

    More about this item

    JEL classification:

    • D9 - Microeconomics - - Micro-Based Behavioral Economics
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth
    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination
    • J16 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Gender; Non-labor Discrimination

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