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Public Sector Pension Funds in Australia: Longevity Selection and Liabilities

Author

Listed:
  • 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.

Suggested Citation

  • Joelle H. Fong & John Piggott & Michael Sherris, 2012. "Public Sector Pension Funds in Australia: Longevity Selection and Liabilities," Working Papers 201217, ARC Centre of Excellence in Population Ageing Research (CEPAR), Australian School of Business, University of New South Wales.
  • Handle: RePEc:asb:wpaper:201217
    as

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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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    References listed on IDEAS

    as
    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, April.
    2. 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, September.
    3. palacios, Robert & Whitehouse, Edward, 2006. "Civil-service pension schemes around the world," Social Protection and Labor Policy and Technical Notes 90340, The World Bank.
    4. 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.
    5. 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.
    6. Pablo Antolin, 2007. "Longevity Risk and Private Pensions," Financial Market Trends, OECD Publishing, vol. 2007(1), pages 107-128.
    7. Beshears, John & Choi, James J. & Laibson, David & Madrian, Brigitte C., 2011. "Behavioral economics perspectives on public sector pension plans," Journal of Pension Economics and Finance, Cambridge University Press, vol. 10(02), pages 315-336, April.
    8. 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.
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