Unisex life care annuities embedded in a pay-as-you-go pension system: Analysing the issue of gender redistribution
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This paper deals with the idea of converting retirement benefit into a life care annuity with graded benefits using a pre-existing public pay-as-you-go pension scheme. Based on accurate biometric data from Australia and the US, the paper shows that using gender-neutral annuity factors to compute the initial benefit involves a large increase in ex-ante gender redistribution compared to a system without long-term coverage. In spite of the very different biometric data, the results are surprisingly similar for both countries. To disentangle the hidden redistribution, a methodology based on conversion (actuarial) factors is used. The value of the actuarial factor relies on a multistate framework in which transitions are modeled from the initial health state to the absorbing state. We also look at what might happen if an annuitant’s initial heath state is not able when they become a beneficiary.
KeywordsGender Life care annuities Long-term care insurance Redistribution Retirement
JELH55 J26 G22 I13 J14
Manuel Ventura-Marco and Carlos Vidal-Meliá are grateful for the financial assistance received from the Spanish Ministry of the Economy and Competitiveness (Ministerio de Economía y Competitividad) project ECO2015-65826-P. They would also like to thank seminar participants at the Universities of La Coruña and Barcelona, Peter Hall for his help with the English text and Juan Manuel Pérez-Salamero González for his help in obtaining data for performing the numerical example. Comments and suggestions made by two anonymous referees were very helpful in improving the current version. Any errors are entirely our own.
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