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Recreating Sustainable RetirementResilience, Solvency, and Tail Risk$
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Olivia S. Mitchell, Raimond Maurer, and P.Brett Hammond

Print publication date: 2014

Print ISBN-13: 9780198719243

Published to Oxford Scholarship Online: December 2014

DOI: 10.1093/acprof:oso/9780198719243.001.0001

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Longevity Risk Management, Corporate Finance, and Sustainable Pensions

Longevity Risk Management, Corporate Finance, and Sustainable Pensions

Chapter:
(p.89) Chapter 6 Longevity Risk Management, Corporate Finance, and Sustainable Pensions
Source:
Recreating Sustainable Retirement
Author(s):

Guy Coughlan

Publisher:
Oxford University Press
DOI:10.1093/acprof:oso/9780198719243.003.0006

Unexpected improvements in mortality rates have led to large unanticipated increases in life expectancy, with accompanying increases in the value of defined benefit pension liabilities. As a result, longevity risk needs to be measured and managed alongside the financial risks facing these plans. The emergence of new instruments for hedging longevity risk means that a complete toolkit is now available for managing these plans in a way that is sustainable over the long term. Decisions to hedge or eliminate longevity risk need to be made in a holistic framework. For corporate pension plans this means taking account of the corporate finance perspective, as well as the interdependencies between the sponsor and the plan. This chapter addresses the importance of measuring and managing longevity risk, and it also presents a holistic framework for sustainable pension plan management that facilitates longevity risk management decision-making.

Keywords:   Longevity risk, defined benefit pension plans, risk management, corporate finance, pension sustainability

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