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Public Sector Pension Funds in Australia: Longevity Selection and Liabilities

  • 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)

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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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. 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, November.
  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. Jeffrey R. Brown & Robert L. Clark, 2011. "The Economics of State and Local Pensions," NBER Books, National Bureau of Economic Research, Inc, number brow11-1, December.
  4. Pablo Antolin, 2007. "Longevity Risk and Private Pensions," Financial Market Trends, OECD Publishing, vol. 2007(1), pages 107-128.
  5. Irena Dushi & Leora Friedberg & Anthony Webb, 2006. "The Impact of Aggregate Mortality Risk on Defined Benefit Pension Plans," Working Papers, Center for Retirement Research at Boston College wp2006-21, Center for Retirement Research, revised Nov 2006.
  6. Palacios, Robert, 2006. "Civil-service pension schemes around the world," MPRA Paper 14796, University Library of Munich, Germany.
  7. 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.
  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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