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There is little disagreement among insurance actuaries and financial economists about the societal benefits of longevity-risk pooling in the form of life annuities, defined benefit pensions, self-annuitization funds, and even tontine…
We investigate the extent to which groups with elevated mortality rates ex ante might opt out of guaranteed national pensions in favour of demographically aligned plans, which we label equitable longevity risk sharing (ELRiS) pools, even if…
Various types of structures that enable a group of individuals to pool their mortality risk have been proposed in the literature. Collectively, the structures are called pooled annuity funds. Since the pooled annuity funds propose different…
There is growing interest in the design of pension annuities that insure against idiosyncratic longevity risk while pooling and sharing systematic risk. This is partially motivated by the desire to reduce capital and reserve requirements…
The stability of income payments in a pooled annuity fund is studied. In those funds, members receive a fluctuating income depending on their experienced mortality in exchange for their pension savings. The focus is on describing the…
We introduce a new pension product that offers retirees the opportunity for a lifelong income and a bequest for their estate. Based on a tontine mechanism, the product divides pension savings between a tontine account and a bequest account.…
Tontines were once a popular type of mortality-linked investment pool. They promised enormous rewards to the last survivors at the expense of those died early. And, while this design appealed to the gambling instinc}, it is a suboptimal way…
We investigate insurance purchases when bequest motives are age-varying and life insurance and life annuities both carry loads. The existing life cycle literature assumes bequests are normal goods without being either necessities or…
This paper examines the optimal annuitization, investment and consumption strategies of a utility-maximizing retiree facing a stochastic time of death under a variety of institutional restrictions. We focus on the impact of aging on the…
Historical tontines promised enormous rewards to the last survivors at the expense of those who died early. While this design appealed to the gambling instinct, it is a suboptimal way to manage longevity risk during retirement. This is why…
This paper assesses the hedge effectiveness of an index-based longevity swap and a longevity cap. Although swaps are a natural instrument for hedging longevity risk, derivatives with non-linear pay-offs, such as longevity caps, also provide…
We consider the problem of optimal annuitization with labour income, where an agent aims to maximize utility from consumption and labour income under age-dependent force of mortality. Using a dynamic programming approach, we derive…
A retiree's appetite for risk is a common input into the lifetime utility models that are traditionally used to find optimal strategies for the decumulation of retirement savings. In this work, we consider a retiree with potentially…
An essential input of annuity pricing is the future retiree mortality. From observed age-specific mortality data, modeling and forecasting can be taken place in two routes. On the one hand, we can first truncate the available data to…
The number of people who receive a stable income for life from a closed pooled annuity fund is studied. Income stability is defined as keeping the income within a specified tolerance of the initial income in a fixed proportion of future…
We study the effects of non-systematic and systematic mortality risks on the required initial capital in a pension plan, in the presence of financial risks. We discover that for a pension plan with few members the impact of pooling on the…
We determine the optimal amount of life insurance for a household of two wage earners. We consider the simple case of exponential utility, thereby removing wealth as a factor in buying life insurance, while retaining the relationship among…
The Health and Retirement Study is a longitudinal study of US adults enrolled at age 50 and older. We were interested in investigating the effect of a sudden large decline in wealth on the cognitive score of subjects. Our analysis was…
This paper proposes a paradigm shift in the valuation of long term annuities, away from classical no-arbitrage valuation towards valuation under the real world probability measure. Furthermore, we apply this valuation method to two examples…
We mathematically demonstrate how and what it means for two collective pension funds to mutually insure one another against systematic longevity risk. The key equation that facilitates the exchange of insurance is a market clearing…