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MODELLING MORTALITY FOR PENSION SCHEMES

Published online by Cambridge University Press:  16 January 2017

Andrew Hunt  and
David Blake
Andrew Hunt*
Affiliation:
Pacific Life Re, Tower Bridge House, St. Katharine's Way, London, E1W 1BA
David Blake
Affiliation:
Pensions Institute, Cass Business School, City University London, 106 Bunhill Row, London, EC1Y 8TZ E-Mail: D.Blake@city.ac.uk
*
E-Mail: a.o.d.hunt.00@cantab.net
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Abstract

For many pension schemes, a shortage of data limits their ability to use sophisticated stochastic mortality models to assess and manage their exposure to longevity risk. In this study, we develop a mortality model designed for such pension schemes, which compares the evolution of mortality rates in a sub-population with that observed in a larger reference population. We apply this approach to data from the CMI Self-Administered Pension Scheme study, using U.K. population data as a reference. We then use the approach to investigate the potential differences in the evolution of mortality rates between these two populations and find that, in many practical situations, basis risk is much less of a problem than is commonly believed.

Keywords

Mortality modellingage/period/cohort modelslongevity basis risk
Type
Research Article
Information
ASTIN Bulletin: The Journal of the IAA , Volume 47 , Issue 2 , May 2017 , pp. 601 - 629
Copyright
Copyright © Astin Bulletin 2017 

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Footnotes

An extended version of this paper (Hunt and Blake, 2016a) is available on the Pensions Institute website (http://www.pensions-institute.org/workingpapers/wp1601.pdf), which contains additional results for female data and more technical details on the models used.

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