Longevity risk
A longevity risk is any potential risk attached to the increasing life expectancy of pensioners and policy holders, which can eventually result in higher pay-out ratios than expected for many pension funds and insurance companies.[1]
One important risk to individuals who are
spending down savings is that they will live longer than expected, and thus exhaust their savings, dying in poverty
or burdening relatives. This is also referred to as "outliving one's savings" or "outliving one's assets".
Individuals
Individuals often underestimate longevity risk. In the United States, most retirees do not expect to live past 85, but this is in fact the median conditional life expectancy for men at 65 (half of 65-year-old men will live to 85 or older, and more women will).
Low interest rates and declining returns exacerbating longevity risk
The collapse in returns on
disposable incomes
stagnate and employees work longer years before retiring.
Bibliography
- Vincent Bazi & M. Nicolas J. Firzli, "1st annual World Pensions & Investments Forum", Revue Analyse Financière, Q2 2011, pp. 7–8
- Thomas Crawford, Richard de Haan, & Chad Runchey, "Longevity risk quantification and management: a review of relevant literature", The Society of Actuaries, March 2008
- Gavin Jones, "Financial Aspects of Longevity Risk", Cass School International Conference on Longevity, 18 Feb. 2005
References
- ^ (in English) see Stephen Richards & Gavin Jones, "Financial Aspects of Longevity Risk", SI Actuarial Society, 26 Oct 2004, archived from the original on 2006-10-04, retrieved 2004-10-26
External links
General information
- Longevity risk transfer or reinsurance news and coverage
- List of longevity swap, reinsurance and risk transfer deals