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Getting life expectancy estimates right for pension policy: period versus cohort approach

Published online by Cambridge University Press:  13 May 2020

Mercedes Ayuso ,
Jorge M. Bravo  and
Robert Holzmann
Mercedes Ayuso*
Affiliation:
Department of Econometrics, Statistics and Applied Economy, University of Barcelona, Riskcenter-UB, Barcelona, Spain
Jorge M. Bravo
Affiliation:
Universidade Nova de Lisboa NOVA IMS & MagIC & CEFAGE-UE & Université Paris-Dauphine PSL, Paris, France
Robert Holzmann
Affiliation:
Austrian National Bank, Vienna, Austria Elected Fellow of the Austrian Academy of Sciences, Vienna, Austria
*
*Corresponding author. Email: robert.holzmann@oeaw.ac.at
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Abstract

In many policy areas it is essential to use the best estimates of life expectancy, but it is vital to most areas of pension policy. This paper presents the conceptual differences between static period and dynamic cohort mortality tables, estimates the differences in life expectancy for Portugal and Spain, and compares official estimates of both life expectancy estimates for Australia, the United Kingdom, and the United States for 1981, 2010, and 2060. These comparisons reveal major differences between period and cohort life expectancy in and between countries and across years. The implications of using wrong estimates for pension policy, including financial sustainability, are explored.

Keywords

Balancing mechanismcross-country comparisonLee–Carterlife expectancy indexationG23H55J14
Type
Article
Information
Journal of Pension Economics & Finance , Volume 20 , Issue 2 , April 2021 , pp. 212 - 231
Copyright
Copyright © Cambridge University Press 2020

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Footnotes

1

This paper was prepared for the BBVA Expert Forum and profited from many valuable and encouraging discussions and comments from its members.

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