Longevity Risk: To Bear or to Insure?

One size fits all? Drawdown structures in Australia and The Netherlands

“…The Dutch, on the other hand, do not typically have equity exposure 7 . The drift term µ is equal to r + λ • σ = 7.96% where λ = 0.22, σ = 0.18 and r = 4%, which aligns with recent welfare studies (Hanewald et al, 2013;Horneff et al, 2014;Boon et al, 2018).…”

“…They show that a GSA can outperform inflation-linked annuities when there are loadings and that portfolios with phased withdrawals improve individuals' welfare when they have a bequest motive. In the same vein, Boon et al (2018) show that individuals marginally prefer the GSA scheme over a fairly priced annuity.…”

“…We assume a subjective discount factor of 1.5%, that is a β = 0.9855 which aligns with the real risk free rate of 1.5%. In the sensitivity analysis we will analyse a subjective discount factor of β = 0.98 in line with recent welfare studies (Feldstein and Ranguelova, 2001;Post, 2012;Hanewald et al, 2013;Boon et al, 2018) and β = 0.991 to assess the effect of impatience.…”

A dynamic equivalence principle for systematic longevity risk management

“…Note that Mauer et al (2013) find, under a lifecycle portfolio choice model with CRRA utility function, that policyholders would be keen to purchase participating contracts provided the loading of this contract is below a certain threshold; see also Weale and van de Ven (2016). In the same spirit, Boon et al (2018) compare the CRRA-based preferences of policyholders between annuity contracts and GSA plans and include the perspective of equity holders. Our results differ and generalize those mentioned above at different levels.…”

The Economics of Sharing Macro-longevity Risk

“…It is to the best of our knowledge the first paper that investigates Pareto-optimal risk-sharing rules of macro-longevity risk. Related papers are De Waegenaere et al 2017, De Waegenaere et al 2018, and papers considering group self-annuitisation schemes (GSAs), for example Piggott et al (2005), Qiao and Sherris (2013) and Boon et al (2017). These papers investigate sharing micro-and macro-longevity risk.…”