Quantifying the trade-off between income stability and the number of members in a pooled annuity fund

DOI10.1017/ASB.2020.33zbMATH Open1471.91447arXiv2010.16009OpenAlexW3103101875MaRDI QIDQ5157765FDOQ5157765

Authors: Thomas Bernhardt, Catherine Donnelly 

Publication date: 20 October 2021

Published in: ASTIN Bulletin (Search for Journal in Brave)

Abstract: The number of people who receive a stable income for life from a closed pooled annuity fund is studied. Income stability is defined as keeping the income within a specified tolerance of the initial income in a fixed proportion of future scenarios. The focus is on quantifying the effect of the number of members, which drives the level of idiosyncratic longevity risk in the fund, on the income stability. To do this, investment returns are held constant and systematic longevity risk is omitted. An analytical expression that closely approximates the number of fund members who receive a stable income is derived and is seen to be independent of the mortality model. An application of the result is to calculate the length of time for which the pooled annuity fund can provide the desired level of income stability

Full work available at URL: https://arxiv.org/abs/2010.16009

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zbMATH Keywords

poolingtontinedecumulationlongevity creditunsystematic risk

Mathematics Subject Classification ID

Actuarial mathematics (91G05)

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Cited In (4)

• Mortality credits within large survivor funds
• Benefit volatility-targeting strategies in lifetime pension pools
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• Wealth heterogeneity in a closed pooled annuity fund

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