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Life-Expectancy Risk and Pensions: Who Bears the Burden?

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  • Edward Whitehouse

    (OECD)

Abstract

Two-thirds of pension reforms in OECD countries in the last 15 years contain measures that will automatically link future pensions to changes in life expectancy. This quiet revolution in pension policy means that the financial costs of longer lives will be shared between generations subject to a rule, rather than spreading the burden through potentially divisive political battles as happened in the past. As a result, nearly half of OECD countries - 13 out of 30 - now have an automatic link between pensions and life expectancy in their retirement-income systems, compared with only one country (Denmark) a decade ago. Indeed, the spread of this policy has a strong claim as the major innovation in pension policy in recent years. The link to life expectancy has been achieved in four different ways... Les deux tiers des réformes des systèmes de retraite dans les pays de l'OCDE ces 15 dernières années comportent des mesures prises pour indexer de manière automatique les futures retraites sur l'évolution de l?espérance de vie. Cette révolution qui s?opère tranquillement dans les politiques de pensions signifie que les coûts financiers engendrés par des vies plus longues seront partagés entre les générations en appliquant une règle plutôt que de répartir cette charge sous l'action de conflits politiques, tel que dans le passé. Par conséquent, près de la moitié des pays de l'OCDE - 13 sur 30 - ont maintenant des liens automatiques entre les pensions et l'espérance de vie dans leurs régimes de retraite, comparé à seulement un pays (Danemark) il y a dix ans. En effet, cette politique apparaît comme étant une des innovations plus importantes en matière de politiques de pensions ces dernières années. Le lien fait à l'espérance de vie a été réalisé de quatre manières différentes...

Suggested Citation

  • Edward Whitehouse, 2007. "Life-Expectancy Risk and Pensions: Who Bears the Burden?," OECD Social, Employment and Migration Working Papers 60, OECD Publishing.
    • Handle: RePEc:oec:elsaab:60-en
    DOI: 10.1787/060025254440
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    Cited by:

    1. 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.
    2. Alvarez, Jesús-Adrián & Kallestrup-Lamb, Malene & Kjærgaard, Søren, 2021. "Linking retirement age to life expectancy does not lessen the demographic implications of unequal lifespans," Insurance: Mathematics and Economics, Elsevier, vol. 99(C), pages 363-375.
    3. Christophe Daniel & Anne Lavigne & Stéphane Mottet & Jesus-Herell Nze Obame & Bruno Séjourné & Christian Tagne, 2016. "La réforme des retraites de 1993 en France : quel impact sur l’équivalent patrimonial des droits à la retraite ?," Working Papers halshs-01293255, HAL.
    4. Balázs Egert, 2012. "The impact of changes in second pension pillars on public finances in Central and Eastern Europe," Working Papers hal-04141069, HAL.
    5. Ferro, Gustavo, 2008. "Un impulso al mercado de rentas vitalicias en España [Promoting the annuities market in Spain]," MPRA Paper 20211, University Library of Munich, Germany, revised Jul 2008.
    6. International Monetary Fund, 2010. "Republic of San Marino: Selected Issues," IMF Staff Country Reports 2010/066, International Monetary Fund.
    7. Ferro, Gustavo, 2008. "On annuities: an overview of the issues," MPRA Paper 20209, University Library of Munich, Germany, revised Oct 2009.
    8. Klaus Kaier & Christoph Müller, 2015. "New figures on unfunded public pension entitlements across Europe: concept, results and applications," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 42(4), pages 865-895, November.
    9. Queisser, Monika & Whitehouse, Edward, 2005. "Pensions at a glance: public policies across OECD countries," MPRA Paper 10907, University Library of Munich, Germany.
    10. Gurvich, Ye., 2011. "Long-Term Demographic Challenges and Pension Policy," Journal of the New Economic Association, New Economic Association, issue 9, pages 193-196.
    11. 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.
    12. Billari, Francesco C. & Favero, Carlo A. & Saita, Francesco, 2023. "Online financial and demographic education for workers: Experimental evidence from an Italian Pension Fund," Journal of Banking & Finance, Elsevier, vol. 151(C).
    13. 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.
    14. José Enrique Devesa Carpio & Mar Devesa Carpio & Robert Meney Gaya & Amparo Nagore García & Inmaculada Domínguez Fabián & Borja Encinas Goenechea, 2012. "Equidad y sostenibilidad como objetivos ante la reforma del sistema contributivo de pensiones de jubilación," Hacienda Pública Española / Review of Public Economics, IEF, vol. 201(2), pages 9-38, June.
    15. Carlo Maccheroni & Samuel Nocito, 2017. "Backtesting the Lee–Carter and the Cairns–Blake–Dowd Stochastic Mortality Models on Italian Death Rates," Risks, MDPI, vol. 5(3), pages 1-23, July.
    16. Martin, John P. & Whitehouse, Edward, 2008. "Reforming Retirement-Income Systems: Lessons from the Recent Experiences of OECD Countries," IZA Discussion Papers 3521, Institute of Labor Economics (IZA).
    17. Paul Bingley & Nabanita Datta Gupta & Peder J. Pedersen, 2017. "Health Capacity to Work at Older Ages in Denmark," NBER Chapters, in: Social Security Programs and Retirement around the World: The Capacity to Work at Older Ages, pages 85-110, National Bureau of Economic Research, Inc.
    18. Adi Brender, 2009. "Distributive Effects of Israel's Pension System," Bank of Israel Working Papers 2009.10, Bank of Israel.
    19. Fabrizio Culotta, 2021. "Life Expectancy Heterogeneity and Pension Fairness: An Italian North-South Divide," Risks, MDPI, vol. 9(3), pages 1-22, March.
    20. Dennis Fredriksen & Nils Martin Stølen, 2011. "Norwegian pension reform Defined benefit versus defined contribution," Discussion Papers 669, Statistics Norway, Research Department.
    21. Callan, Tim & Keane, Claire & Walsh, John R., 2009. "Pension Policy: New Evidence on Key Issues," Research Series, Economic and Social Research Institute (ESRI), number RS14.

    More about this item

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination

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