Longevity Risk

The risk of outliving one's assets. In other words, the risk of running out of money during retirement. In most countries, average life expectancy has increased dramatically over the past several decades. Longer lifespans are somewhat of a mixed blessing because of the financial burden associated with more years of retirement. Individuals, insurance companies and governments are exposed to the financial pressures created by the need to finance increasing longevity. Longevity risk is a key challenge for many societies around the world.

A Visual Representation of Longevity

There is an interesting blog that appears to be affiliated with the British pension consulting firm Redington. The “Red Blog” offers pension-related content from a group of authors who are both formally and informally associated with Redington. Not surprisingly, longevity trends and longevity risk are prominent topics on the Red Blog. The design of the blog and the visual representation of dry and fairly abstract topics are unique. For example, this graphic provides an interesting...

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GAO Retirement Income Study Bullish on Annuities

At the request of Wisconsin Senator Herb Kohl, the Government Accountability Office (GAO) just released a study that provides an assessment of the current state of the retirement income market in the United States.

For those interested in retirement income, the study is full of interesting data and conclusions. Some...

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Longevity Market Development Still in Infancy

A recent article in Bloomberg discusses the state of capital market solutions for the transfer of longevity risk. The reality is that the longevity market is still in its infancy and there are a number of obstacles that are affecting its development. One of the main hurdles involves the fact that longevity risk is very long-term in nature. Securities that mature over the course of 20 years are not hugely appealing to hedge fund managers who are providing quarterly performance reports to their...

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Guaranteed Income Solutions Take Center Stage

Putnam Investments President and CEO Robert Reynolds spoke on the need to address America’s lifetime income challenge at the recent Retirement Income Industry Association (RIIA) conference in Chicago.

While Reynolds has spent most of his career in leadership positions in the investment management industry, his...

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First Longevity Swap for Active Pension Plan Members Enabled by JP Morgan

JP Morgan recently assumed 70 million pounds of longevity risk through a longevity swap that covers the lives of active members of a UK-based defined benefit pension plan . This is the first longevity swap that covers active pension plan participants. Previous deals have focused on retired pension plan members. The longevity swap is based on JP Morgan's LifeMetrics longevity index and it has a 10 year term. The index-based swap is reportedly a better vehicle for dealing with active pension plan...

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