Transforming Private Pensions: An Actuarial Model to Face Long-Term Costs

A common response in public pension systems to population ageing is to link pensions to observed longevity. This creates an automatic stabiliser that arises from the valuation of a private actuarially funded system. However, no private pension plan mechanism has been articulated to adapt to this age...

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Autores: De la Peña Esteban, Joseba Iñaki, Fernández Ramos, María Cristina, Garayeta Bajo, Asier, Martín González, Iratxe Dorleta
Tipo de recurso: artículo
Fecha de publicación:2022
País:España
Institución:Universidad del País Vasco
Repositorio:Addi. Archivo Digital para la Docencia y la Investigación
OAI Identifier:oai:addi.ehu.eus:10810/56377
Acceso en línea:http://hdl.handle.net/10810/56377
Access Level:acceso abierto
Palabra clave:ageing
dependency
long-term care
private pensions
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spelling Transforming Private Pensions: An Actuarial Model to Face Long-Term CostsDe la Peña Esteban, Joseba IñakiFernández Ramos, María CristinaGarayeta Bajo, AsierMartín González, Iratxe Dorletaageingdependencylong-term careprivate pensionsA common response in public pension systems to population ageing is to link pensions to observed longevity. This creates an automatic stabiliser that arises from the valuation of a private actuarially funded system. However, no private pension plan mechanism has been articulated to adapt to this ageing in relation to the increased costs it entails. Private pension plans focus on saving for retirement; capital is accumulated to pay for it. However, perceptions of health status change over time and, as retirement age approaches, concerns about long-term care (LTC) increase. Moreover, there is not enough time to plan for it sufficiently in advance. This paper proposes to incorporate a mechanism to add an allowance to the financial pension (retirement, disability, rotation) to cover LTC within a private defined benefit pension plan, in the case of a pensioner becoming dependent. Depending on a pensioner’s health status, both the expected number of payments and their intensity are transformed. For this purpose, a mechanism is defined (through Markov chains) to adapt the amount of LTC support to a beneficiary’s health-related life expectancy. The study’s main contribution is that it establishes a private pension plan model that offers to incorporate dependency aid through this mechanism into the economic pensions without increasing the total cost of the plan. It adapts to life expectancy according to a person’s state (healthy, disabled, dependent).This research was funded by the Cliobasque Consolidated Research Group Eusko Jaurlaritza/Gobierno Vasco EJ/GV grant number IT1523-22.MDPI2022202220222022info:eu-repo/semantics/articleapplication/pdfhttp://hdl.handle.net/10810/56377reponame:Addi. Archivo Digital para la Docencia y la Investigacióninstname:Universidad del País VascoIngléshttps://www.mdpi.com/2227-7390/10/7/1082/htminfo:eu-repo/semantics/openAccesshttp://creativecommons.org/licenses/by/3.0/es/2022 by the authors. Licensee MDPI, Basel, Switzerland. This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license (https://creativecommons.org/licenses/by/4.0/).oai:addi.ehu.eus:10810/563772026-06-18T09:23:17Z
dc.title.none.fl_str_mv Transforming Private Pensions: An Actuarial Model to Face Long-Term Costs
title Transforming Private Pensions: An Actuarial Model to Face Long-Term Costs
spellingShingle Transforming Private Pensions: An Actuarial Model to Face Long-Term Costs
De la Peña Esteban, Joseba Iñaki
ageing
dependency
long-term care
private pensions
title_short Transforming Private Pensions: An Actuarial Model to Face Long-Term Costs
title_full Transforming Private Pensions: An Actuarial Model to Face Long-Term Costs
title_fullStr Transforming Private Pensions: An Actuarial Model to Face Long-Term Costs
title_full_unstemmed Transforming Private Pensions: An Actuarial Model to Face Long-Term Costs
title_sort Transforming Private Pensions: An Actuarial Model to Face Long-Term Costs
dc.creator.none.fl_str_mv De la Peña Esteban, Joseba Iñaki
Fernández Ramos, María Cristina
Garayeta Bajo, Asier
Martín González, Iratxe Dorleta
author De la Peña Esteban, Joseba Iñaki
author_facet De la Peña Esteban, Joseba Iñaki
Fernández Ramos, María Cristina
Garayeta Bajo, Asier
Martín González, Iratxe Dorleta
author_role author
author2 Fernández Ramos, María Cristina
Garayeta Bajo, Asier
Martín González, Iratxe Dorleta
author2_role author
author
author
dc.subject.none.fl_str_mv ageing
dependency
long-term care
private pensions
topic ageing
dependency
long-term care
private pensions
description A common response in public pension systems to population ageing is to link pensions to observed longevity. This creates an automatic stabiliser that arises from the valuation of a private actuarially funded system. However, no private pension plan mechanism has been articulated to adapt to this ageing in relation to the increased costs it entails. Private pension plans focus on saving for retirement; capital is accumulated to pay for it. However, perceptions of health status change over time and, as retirement age approaches, concerns about long-term care (LTC) increase. Moreover, there is not enough time to plan for it sufficiently in advance. This paper proposes to incorporate a mechanism to add an allowance to the financial pension (retirement, disability, rotation) to cover LTC within a private defined benefit pension plan, in the case of a pensioner becoming dependent. Depending on a pensioner’s health status, both the expected number of payments and their intensity are transformed. For this purpose, a mechanism is defined (through Markov chains) to adapt the amount of LTC support to a beneficiary’s health-related life expectancy. The study’s main contribution is that it establishes a private pension plan model that offers to incorporate dependency aid through this mechanism into the economic pensions without increasing the total cost of the plan. It adapts to life expectancy according to a person’s state (healthy, disabled, dependent).
publishDate 2022
dc.date.none.fl_str_mv 2022
2022
2022
2022
dc.type.none.fl_str_mv info:eu-repo/semantics/article
format article
dc.identifier.none.fl_str_mv http://hdl.handle.net/10810/56377
url http://hdl.handle.net/10810/56377
dc.language.none.fl_str_mv Inglés
language_invalid_str_mv Inglés
dc.relation.none.fl_str_mv https://www.mdpi.com/2227-7390/10/7/1082/htm
dc.rights.none.fl_str_mv info:eu-repo/semantics/openAccess
http://creativecommons.org/licenses/by/3.0/es/
eu_rights_str_mv openAccess
rights_invalid_str_mv http://creativecommons.org/licenses/by/3.0/es/
dc.format.none.fl_str_mv application/pdf
dc.publisher.none.fl_str_mv MDPI
publisher.none.fl_str_mv MDPI
dc.source.none.fl_str_mv reponame:Addi. Archivo Digital para la Docencia y la Investigación
instname:Universidad del País Vasco
instname_str Universidad del País Vasco
reponame_str Addi. Archivo Digital para la Docencia y la Investigación
collection Addi. Archivo Digital para la Docencia y la Investigación
repository.name.fl_str_mv
repository.mail.fl_str_mv
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