Addressing Longevity’ Heterogeneity in Pension Scheme Design

Article English OPEN
Ayuso, Mercedes ; Bravo, Jorge Miguel ; Holzmann, Robert (2017)
  • Related identifiers: doi: 10.12735/jfe.v6n1p1
  • Subject: Defined Contribution Scheme | Two-Tier Contribution Structure | Proxied Life Expectancy | Tax/Subsidy Structure

Ayuso, M., Bravo, J. M., & Holzmann, R. (2017). Addressing Longevity’ Heterogeneity in Pension Scheme Design. Journal of Finance and Economics, 6(1), 1-21. DOI: 10.12735/jfe.v6n1p1 This paper demonstrates that the link between heterogeneity in longevity and lifetime income across countries is mostly high and often increasing; that it translates into an implicit tax/subsidy, with rates reaching 20 percent and higher in some countries; that such rates risk perverting redistributive objectives of pension schemes and distorting individual lifecycle labor supply and savings decisions; and that this in turn risks invalidating current reform approaches of a closer contribution-benefit link and life expectancy-indexed retirement age. The paper suggests and explores a number of interventions in the accumulation, benefit determination, and disbursement stages to address longevity’ heterogeneity. publishersversion published
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