Discussion on “Periodic or generational actuarial tables: which one to choose?” (by Arnold et al.)
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Longevity risk—the risk of paying out pensions and annuities longer than anticipated—is a major risk for the sustainability of the Swiss retirement system. Each pension fund (collective foundation incl.) is responsible for sufficient reserving and has to set up various additional actuarial provisions to support the guarantee of pensions in payment. The size of the pension liabilities depends on the actuarial mortality table and the discount rate used.
In Switzerland there is only one official actuarial mortality table: LPP/BVG (hereafter LPP), available for private pension funds. Another table, VZ, is used for Swiss public pension funds. Both offer generational and periodic mortality tables, which are now updated every 5 years and are not substantially different from each other (in relation to the level of future life expectancies) because they are partially based on the same mortality statistics and use the same forecasting technique.
The level of the discount rate is affected by the...