The Little Problem of Longevity:
Searching for Answers to Uncertainty

Abstract

This article examines historical and future trends in life expectancy across the world. The expected increases in longevity could have significant implications for the structure of pension systems in the future. Individuals, businesses, and governments have already responded to these expected increases—for example, by working longer, closing defined-benefit pension schemes, or introducing parametric reforms to state pension systems—and are likely to make further changes in the future. However, future longevity trends are uncertain, making it more difficult not only to allocate longevity risk efficiently and fairly across different economic but also to guarantee the sustainability of the system overall. Now, innovative solutions to this challenge are being developed by the capital markets and others.