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Minimising Longevity and Investment Risk while Optimising Future Pension Plans

This commissioned research programme seeks to develop pension product designs that keep the customers' needs at the forefront, with a real income in retirement that minimises costs for the customer

Programme objectives

  • share risks between customers
  • determine the trade-off between the performance and stability of pension income
  • study how to incorporate and manage illiquid assets that can be used to hedge inflation
  • establish a framework to analyse the trade-off between the performance and stability of pension income in the proposed products
  • determine dynamic econometric models that are suitable for our long-term products
  • and determine how the dynamic econometric models can be used to optimally time to buy and sell assets.

This multidisciplinary team is led by Professor Jens Perch Nielson (Cass Business School) and Dr Catherine Donnelly (Heriot-Watt University).The funding supports two PhD students in actuarial science.

Recent events

ARC Webinar Series: Minimising Longevity and Investment Risk while Optimising Future Pension Plans

Wednesday 03 October 2018

Following the successful launch of last year’s webinar series, the Actuarial Research Centre (ARC) produced a further series of webinars in 2018 to showcase its largest cutting-edge research programmes, addressing some of the significant challenges in actuarial science.

The webinar is presented by one of the Principal Investigators of this research programme, Dr. Catherine Donnelly (Heriot-Watt). By watching this webinar you will learn about the objectives of this research programme and some of the early developments since its commencement in 2016.

A recording of the webinar is available on YouTube and is posted on the IFoA's online learning webpages.

Half day workshop: Decumulation and Investment Return-Sharing: What is the Latest Research?

Thursday 13 September

This workshop showcased the latest research being carried out by the IFoA’s Actuarial Research Centre through the commissioned research programme ‘Minimising Longevity and Investment Risk while Optimising Future Pension Plans’.

The programme is seeking to develop pension product designs that keep the customers' needs at the forefront, with a real income in retirement that minimises costs for the customer.

This workshop covered two topics:

- How to invest your savings during retirement.  Industry products are mostly restricted to either life annuity contracts or draw-down with a constant-mix investment strategy.  However, many alternative approaches have been explored in scientific papers.

- Investment return-sharing structures in a pension-saving setting.  There have been many structures examined in the academic literature.  Some of them are stylisations of country-typical participating policies but others are quite unique.   The structures and our understanding of them will be discussed.

The latest scientific research was covered for both topics, including new research for the ARC project.

ARC Sessional Research Event: Self-selection and risk sharing in a modern world of life-long annuities

Monday 14 May, Staple Inn Hall, London

In this sessional Professor Jens Perch Nielsen and his co-authors (from Cass Business School) discussed new solutions to three of the most current and challenging problems in pension research. The three challenges addressed were:

a) To make the product so easy to understand that the pensioner can  self-select the financial risk and design the financial investment strategy within minutes
b) Automatic and easy to understand mortality risk sharing between customers
c) Automatic and easy to understand investment guarantee risk sharing between customers, so that they do not have to pay for their investment guarantee and such that the pension company does not need to issue one.

View the event recording 

Contact Details

If you want more information about our research programmes please contact the IFoA Actuarial Research Centre:

arc@actuaries.org.uk