Journal of Finance and Economics

Journal of Finance and Economics

ISSN: 2291-4951 (Print)    ISSN: 2291-496X (Online)

Volume 6 (2017), No. 1, Pages 1-21

DOI: 10.12735/jfe.v6n1p1

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Addressing Longevity’ Heterogeneity in Pension Scheme Design

Mercedes Ayuso1  Jorge Miguel Bravo2  Robert Holzmann3 

1Department of Econometrics, Statistics and Spanish Economy, University of Barcelona, Spain
2Information Management School, Nova University of Lisbon, Portugal
3Austrian Academy of Sciences, Vienna, Austria; and University of New South Wales, Sydney, Australia


To Cite this Article     Article Views: 859     Downloads: 471  Since deposited on 2017-08-31


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.

JEL Classifications: D9, G22, H55, J13, J14, J16

Keywords: Defined Contribution Scheme, Tax/Subsidy Structure, Proxied Life Expectancy, Two-Tier Contribution Structure

To Cite this Article: Ayuso, M., Bravo, J. M., & Holzmann, R. (2017). Addressing longevity heterogeneity in pension scheme design. Journal of Finance and Economics, 6(1), 1-21.

Copyright © Mercedes Ayuso et al.

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This article is published under license to Science and Education Centre of North America. This is an Open Access article distributed under the terms of the Creative Commons Attribution 4.0 International License.

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Addressing Longevity’ Heterogeneity in Pension Scheme Design