How do unisex life care annuities embedded in a pay-as-you-go retirement system affect gender redistribution?

Javier Pla-Porcel, Manuel Ventura-Marco and Carlos Vidal-Melia
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Javier Pla-Porcel: Actuarial Department, SOS Seguros y Reaseguros, S.A., Madrid. (Spain).
Manuel Ventura-Marco: Department of Financial Economics and Actuarial Science, University of Valencia, Spain.

No 2017-11, Documentos de Trabajo del ICAE from Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales, Instituto Complutense de Análisis Económico

Abstract: This paper aims to assess gender redistribution when using unisex conversion factors to compute the initial benefit of life care annuities (LCAs) embedded in a pay-as-you-go (PAYG) pension system. We use a method based on actuarial factors to disentangle the hidden redistribution of LCAs with graded benefits. 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. According to our calculations for Australia and the US, the amount of gender redistribution is by no means irrelevant. In spite of the very different biometric data, the results are surprisingly similar for both countries. Risk equalization based on the “equal treatment” of men and women may not be fair, given that age, gender and health state are very significant risk factors in computing the initial benefit in a system covering retirement and long-term care.

Keywords: Gender; Life Care Annuities; Long-Term Care Insurance; Multistate model; Redistribution; Retirement. (search for similar items in EconPapers)
JEL-codes: G22 H55 I13 J14 J26 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2017-02
New Economics Papers: this item is included in nep-age, nep-eur and nep-ias
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