Managing Longevity Risk in Low and Moderate Income Countries: Longevity Insurance Benefits as a Policy Solution

John A. Turner^1, , Gerard Hughes², Agnieszka Chłoń-Domińcak³ and David M. Rajnes⁴

¹Pension Policy Center, Washington, DC, US

²Trinity College, Dublin, Ireland

³Warsaw School of Economics, Warsaw, Poland

⁴U.S. Social Security Administration, Washington, DC, US

Cite this paper:
John A. Turner, Gerard Hughes, Agnieszka Chłoń-Domińcak and David M. Rajnes. Managing Longevity Risk in Low and Moderate Income Countries: Longevity Insurance Benefits as a Policy Solution. Journal of Finance and Economics. 2018; 6(4):154-161. doi: 10.12691/jfe-6-4-5

Abstract

Longevity risk is a problem for older people worldwide. The majority of people worldwide age 75 and older do not receive social security old-age benefits. This problem mainly occurs in lower-income countries. This paper argues for old-age benefits coverage for persons age 75 and older through longevity insurance benefit programmes. Because of the advanced age at which these programmes start paying benefits, such a goal would be relatively inexpensive for most countries. This would be an intermediate goal toward full coverage of all older persons. This paper discusses the Care Allowance in Poland for persons age 75 and older and the Age 80 Allowance in Ireland as models that can be adapted to lower-income and moderate-income countries with low coverage rates for extending pension coverage to people starting at an advanced age.

Keywords:
managing longevity risk longevity insurance benefits extending pension coverage social pensions

This work is licensed under a Creative Commons Attribution 4.0 International License. To view a copy of this license, visit http://creativecommons.org/licenses/by/4.0/

References:

[1]	International Labour Organisation. 2010. “World Social Security Report 2010/11: Providing Coverage in Times of Crisis and Beyond.” http://www.ilo.org/gimi/gess/ShowTheme.do?tid=1985.
[2]	Gillion, C., J.A. Turner, C. Bailley and D. Latulippe (editors). 2000. Social Security Pensions: Development and Reform. Geneva, Switzerland: International Labour Office.
[3]	van Ginneken, W. 2003. “Extending Social Security: Policies for Developing Countries.” International Labour Review 142(3): 277-294.
[4]	Global Action on Aging. 2016. “Social Pensions.” http://www.globalaging.org/pension/world/social/socialpensions.htm.
[5]	Chen, T. and J.A. Turner. “Extending Social Security Coverage to the Rural Sector in China.” International Social Security Review 2014 (1): 49-70.
[6]	Rofman, R. with the collaboration of E. Carranza. 2005. “Social Security Coverage in Latin America.” Social Protection Discussion Paper Series No. 0523, World Bank, May. http://www-wds.worldbank.org/external/default/WDSContentServer/IW3P/IB/2005/06/28/000011823_ 20050628153601/Rendered/PDF/327540PAPER00523.pdf.
[7]	Dorfman, M.C. 2015. Pension Patterns in Sub-Saharan Africa. Washington, DC: World Bank. http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2015/07/15/090224 b082ffbd6a/1_0/Rendered/PDF/Pension0patterns0in0Sub0Saharan0Africa.pdf.
[8]	Overbye, E. 2005. “Extending Social Security in Developing Countries: A Review of Three Main Strategies.” International Journal of Social Welfare 14(4): 305-314.
[9]	van Ginneken, W. 2007. “Extending Social Security Coverage: Concepts, Global Trends, and Policy Issues.” International Social Security Review 60 (2-3): 39-57.
[10]	Kwena, R.M. and J.A. Turner. “Extending Pension and Savings Scheme Coverage to the Informal Sector: Kenya's Mbao Pension Plan.” International Social Security Review 2013, 66(2): 79-99.
[11]	Chen, T. and J.A. Turner. “Longevity Insurance Annuities: China Adopts a Benefit Innovation from the Past.” International Social Security Review (2015) 68(2): 27-42.
[12]	Milevsky, M.A. 2005. “Real Longevity Insurance with a Deductible: An Introduction to Advanced-Life Delayed Annuities (ALDA),” North American Actuarial Journal 9(4): 109-122. http://www.ifid.ca/pdf_workingpapers/WP2004FEB_.pdf.
[13]	Webb, A.; G. Gong and W. Sun. 2007. “An Annuity People Might Actually Buy,” Center for Retirement Research at Boston College, Issue in Brief No. 7-10, July.
[14]	Iwry, J.M. and J.A. Turner. 2009. “New Behavioral Strategies for Expanding Lifetime Income in 401(k)s.” In Automatic: Changing the Way America Saves, edited by William G. Gale, J. Mark Iwry, David John, and Lina Walker. Washington, DC: Brookings Institution Press.
[15]	Turner, J.A. 2011. Longevity Policy: Facing Up to Longevity Issues Affecting Social Security, Pensions, and Older Workers, Kalamazoo, MI: W.E. Upjohn Institute for Employment Research.
[16]	Turner, J.A.. 2013. “Providing Longevity Insurance Annuities: A Comparison of the Private Sector versus Social Security,” The Journal of Retirement, Fall, 1(2): 125-130.
[17]	Abraham, K.G. and B.H. Harris. 2014. “Better Financial Security in Retirement? Realizing the Promise of Longevity Annuities.” Economic Studies at Brookings, November, pp. 1-20.
[18]	Blake, D. and J.A. Turner. 2014. “Longevity Insurance Annuities: Lessons from the United Kingdom.” Benefits Quarterly 2014(1): 39-47.
[19]	Chen, T., G. Hughes and J.A. Turner. 2016. “Longevity Insurance Benefits for Social Security: International Experience.” Benefits Quarterly 2016 (2): 43-53.
[20]	International Labour Organisation. 2005. “Can Low Income Countries Afford Basic Social Protection? First Results of a Modelling Exercise.” Issues in Social Protection, Discussion Paper No. 13. Written by Karuna Pal, Christina Behrendt, Florian Léger, Michael Cichon, and Krzysztof Hagemejer. http://www.globalaging.org/pension/world/2006/socialprotectionandoldage.pdf.
[21]	Help Age International. 2004. “Age and Security: How Social Pensions Can Deliver Effective Aid to Poor Older Persons and Their Families.” file:///C:/Users/Owner/Downloads/Age%20and%20security%20full%20report.pdf.
[22]	World Bank. 2005. “Social Transfers and Chronic Poverty: Emerging Evidence and the Challenge Ahead.” Department for International Development, October. http://www.globalaging.org/pension/world/2005/challenges.pdf.
[23]	Capretta, J. C. 2007. Global Aging and the Sustainability of Public Pension Systems: An Assessment of Reform Efforts in Twelve Developed Countries. A Report of the Aging Vulnerability Index Project. Washington, DC: Center for Strategic & International Studies. <http://csis.org/files/media/csis/pubs/pension_profile.pdf>.
[24]	U.K. Office for National Statistics. 2015. “English Life Tables No. 17, 2010-2012.” Statistical Bulletin, September 1.
[25]	Harrysson L. and P.G. Edebalk. 2010. Employers and Pension Reform in Sweden from War to War. Lunds University Working Paper. http://www4.lu.se/images/Socialhogskolan/WP2010_4.pdf.
[26]	Beltrão, K.I., S.S. Pinheiro and F.E. Barreto de Oliveira. 2004. “Rural Population and Social Security in Brazil: An Analysis with Emphasis on Constitutional Changes.” International Social Security Review 57: 19-49.
[27]	Szczepański, M. 2015. “Longevity Risk and the Design of the Polish Pension System.” Economics and Business Review 1(3): 78-89.
[28]	Szatur-Jaworska, B. 2008. Bezpieczeństwo socjalne – wybrane pieniężne świadczenia społeczne. In: B.Szatu-Jaworska (ed.) Stan przestrzegania praw osób starszych w Polsce. Analiza i rekomendacje działań. Biuletyn RPO Materiały. Issue no 65, Warsaw.
[29]	Government of Kenya. 2014. “Participation of Vulnerable Populations in Their Own Programmes: The Cash Transfers in Kenya.” http://www.ngeckenya.org/Downloads/cash-transfer-programme-vulnerable-groups-kenya.pdf.
[30]	U.S. Social Security Administration. 2016. “Tanzania (Zanzibar) Introduces New Universal Pension.” International Update. Forthcoming.
[31]	U.S. Social Security Administration. 2011. “India.” International Update, July. https://www.ssa.gov/policy/docs/progdesc/intl_update/2011-07/index.html#india.
[32]	Social Security Administration (U.S.). 2015. Social Security Programs Throughout the World: Af4ica, 2015. https://www.ssa.gov/policy/docs/progdesc/ssptw/2014-2015/africa/index.html.
[33]	U.K. Office for National Statistics. 2014. “Social Security and Pensions in East Africa.” In Social Security and Pension Reform: International Perspectives, edited by Marek Szczepański and John A. Turner. Kalamazoo, MI: Upjohn Institute, pp. 235-268.
[34]	World Bank. 1994. Averting the Old Age Crisis: Policies to Protect the Old and Promote Growth. Washington, DC: World Bank.