Longevity Risk

Longevity Risk

The risk that an individual will outlive his/her retirement savings. For example, if one's retirement consists of personal savings and a fixed-term annuity, the possibility exists that the money will run out before one dies. The risk is especially large if one has health problems in one's old age. One may mitigate longevity risk in a number of ways. For example, one may purchase investment vehicles such as a lifetime annuity, which guarantees payments for the remainder of one's life, or longevity insurance, which provides a lump sum benefit if one lives to a certain age.
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The traditional method of transferring longevity risk is through insurance and reinsurance contracts.
Also, PICA assumed the longevity risk for about USD1.
However, the report found that managing longevity risk remains high on pension scheme agendas.
The report includes special discussions on the potential benefits of the PRC's efforts to link its bond market to the rest of the world - called the Bond Connect scheme - and a conceptual solution to cope with longevity risk in Asia.
He also provides a number of risk management strategies, helping readers understand the dangers posed by longevity risk and the sequence of returns.
He also worked on international deals, including a $28 billion reinsurance transaction covering longevity risk from British Telecom pension scheme.
The Treasury department has also made it easier for individuals to protect against longevity risk by investing in deferred annuities through 401(k) plans.
Life annuities are recognized as an important product that protects individuals against longevity risk and investment risk in retirement.
Financial professionals use the term longevity risk to describe this issue.
According to Giles, it was a corporate finance transaction to secure the plan's balance sheet from longevity risk and therefore invisible to them.
Defined Benefit Solutions, part of our group retirement services business, completed a transfer of longevity risk for CDN5 billion of pension plan liabilities from Bell Canada to Sun Life.
A new paper by the Brookings Institution, released today, explores longevity annuities and their role in helping consumers manage retirement risks including longevity risk.