The potential costs of Longevity Risk on Public Pensions. Evidence from Italian data

Benedetta Frassi (), Fabio Pammolli () and Luca Regis ()
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Benedetta Frassi: IMT School for Advanced Studies Lucca

No 01/2017, Working Papers from IMT School for Advanced Studies Lucca

Abstract: In this article, we assess, through an empirical investigation based on Italian data, how uncertainty regarding future mortality may affect public pension expenditure. Based on a representative sample of Italian pensioners from 1985 to 2011, we find a consistent underestimation of improvements seen in mortality and life expectancy when forecasts are based on expectations. The pension expenditure estimated using realized mortality rates is shown to be consistently higher than that obtained by using average forecasted scenarios, produced with well-known stochastic mortality models. The paper highlights the importance of considering the uncertainty regarding future pension benfits, i.e. of evaluating and managing the longevity risk in public pension plans.

Keywords: longevity risk; mortality model; pension; retirement (search for similar items in EconPapers)
JEL-codes: C15 C32 J11 J26 (search for similar items in EconPapers)
Pages: 21
Date: 2017-01, Revised 2017-01
New Economics Papers: this item is included in nep-age and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published in EIC working paper series

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http://eprints.imtlucca.it/3628/1/EIC_WP_1_2017.pdf First version, 2017

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