Rethinking the Indexation of Retirement Age: Cohort vs. Period Life Expectancy

Mariarosaria Coppola (), Maria Russolillo () and Rosaria Simone ()
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Mariarosaria Coppola: Federico II University, Department of Political Sciences
Maria Russolillo: University of Salerno, Department of Economics and Statistics
Rosaria Simone: Federico II University, Department of Political Sciences

A chapter in New Perspectives in Mathematical and Statistical Methods for Actuarial Sciences and Finance, 2025, pp 86-95 from Springer

Abstract: Abstract Over the past two centuries, life expectancy has risen steadily in industrialized countries, challenging the financial sustainability of pension systems. In systems with indexed pension age, a key issue is whether to use period life expectancy (PLE) or cohort life expectancy (CLE). CLE relies on real cohort data and captures future mortality improvements; requiring a full lifespan of data, it can be estimated only for extinct cohorts. To address this, CLE is often estimated using life tables combining past and expected future mortality. In contrast, PLE is based on mortality rates observed in a single period. It is simpler but less accurate than CLE, particularly when assessing the retirement systems sustainability. The aim of this paper is twofold: measuring the gap between CLE and PLE at age 65 for Italian population using Lee-Carter and Renshaw-Haberman models for mortality projections, and assessing how this gap affects the pension age shift.

Keywords: cohort life expectancy; period life expectancy; LC model; RH model; pension age shift (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-032-05551-4_8

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DOI: 10.1007/978-3-032-05551-4_8

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