You are here

Population Ageing, Implications for Asset Values, and Impact for Pension Plans: An International Study

The Institute and Faculty of Actuaries (IFoA) co-sponsored an international research project, looking into the impact ageing populations have on asset values over long time periods and considering the potential impact on large pension plans in Canada, the UK and the United States. The research was conducted by the University of Waterloo (Canada) and the University of Kent (UK).

The Population Ageing, Implications for Asset Values, and Impact for Pension Plans: An International Study was primarily funded by the Canadian Funding Body SSHRC, with additional financial support from the IFoA, the Society of Actuaries in the USA, the Canadian Institute of Actuaries, the University of Waterloo and the University of Kent.

Latest news

New international research on the connection between population structure and bond yields

Wednesday 15 April 2020

The IFoA has published a new international research paper, released jointly with the Society of Actuaries and the Canadian Institute of Actuaries. This research looks at the implications for population ageing on different asset classes and illustrates that impact on the financial status of pension plans. Exploring the impact of population ageing on bond yields in various countries, this research finds that the ratio of the middle-aged to the young or old population is associated with either a reduction or an increase of bond yields at various points on the yield curve. Read the full report here. 

As part of this wider project, the IFoA is funding a PhD student (Aniketh Pittea), based at the University of Kent, who is specifically focusing on:

  • developing a generic economic capital model of a large pension plan which can suitably be adapted to represent pension schemes in the UK, US, Canada and other developing countries
  • implementing and integrating the demographic and asset valuation models, developed during the other phases of the research initiative, in the economic capital model of the pension plan
  • analysing the impact and sensitivity of demographic structure and asset valuation models on the financial risk management of pension plan
  • suggesting alternative risk-mitigating strategies that can be employed by pension plans to cope with the underlying risks.

The research project will break new ground by incorporating gender into an overlapping generations model to better understand the differences in retirement outcomes for males and females.  It is also set to include international capital flows in the analysis and will consider the impact on specific asset classes, such as equities, property and infrastructure.

The research findings will have important implications for pension funds, asset managers, and individuals. If asset prices are materially affected by an ageing population, then actuaries and risk managers need to incorporate this consideration into their work.

Latest events and publications

Joint CIA, IFoA, SOA Webcast: Measuring Pension Plan Risk from an Economic Capital Perspective

Wednesday 15 May 2019

Jointly sponsored by the Institute and Faculty of Actuaries, Society of Actuaries, and CIA, this webcast presented research that compares the risk profiles of pension plans in the UK, the US, and Canada. By the end of this session, attendees were able to:

Identify the key items that affect the financial risk of a defined benefit pension plan;
Compare the financial risk implications of different pension plan designs; and
Evaluate the impact of alternative asset mix policies on the financial risk of a pension plan.

Speakers: Stephen Bonnar (FCIA), University of Waterloo, Aniketh Pittea and Pradip Tapadar, School of Mathematics, Statistics & Actuarial Science, University of Kent

About the webcast: Economic capital, the 0.5th percentile result of a stochastic projection, is the primary risk measure employed. The research examines not only the difference in economic capital requirements between typical plans in the three countries, but also its sensitivity to changes in asset allocation, contributions, and starting funded status. The recording is now available to members in the VLE. If you have any questions regarding this webcast please email us.

***

The IFoA, CIA and SOA launch innovative international pensions risk report

Wednesday 13 November 2019

In November, we were proud to announce the launch of a pensions-focused research report from the University of Kent and the University of Waterloo, in Canada. This research has been supported by an international partnership of funders, including the IFoA, the Canadian Institute of Actuaries and the Society of Actuaries in the US. In this essential new research report, ‘A Tale of Two Pensions Plans’, the research team explore the potential challenges faced by Defined Benefit pension scheme sponsors and trustees in ensuring security of benefits for pension scheme members and the associated uncertainty.

Download the report

***

2018 International Congress of Actuaries, Berlin

We are delighted to announce that this research team were selected for a Best Paper Award at the 2018 International Congress of Actuaries in Berlin. Countries with an ageing population are concerned that the expected drop in saving and investment will result in substantially diminished asset prices and compromised pension plans. This award-winning paper contributes to the quantification of the link between population structure and asset values, by modelling returns on assets in the presence of demographic change.

photo of best paper award at ICA

From left to right Lori Curtis, Kate Rybczynski, Steve Bonnar (all University of Waterloo), Jaideep Oberoi (University of Kent), award presenter (Juergen Bierbaum). Other co-authors not present: Miguel Leon-Ledesma (University of Kent) and Mark Zhou (CMHC). It was the ICA 2018 Best Paper Award - Demographic Change and Longevity and the presenter stated that one aspect of the paper which the committee liked was the way it combined economic models with actuarial science.

 

Commissioned by: The IFoA, Society of Actuaries, Canadian Institute of Actuaries, SSHRC, University of Waterloo and the University of Kent
Conducted by: The University of Waterloo and the University of Kent
Period of research: 2016 – 2019
Outputs:

You might also like

Contact Details

If you have any questions or wish to discuss any aspect of research carried out through the Actuarial Research Centre (ARC), please contact the Research and Knowledge Team.

arc@actuaries.org.uk

Filter or search events

Start date
E.g., 04/12/2021
End date
E.g., 04/12/2021

Events calendar

  • The Growth Mindset for Actuaries

    13 October 2021 - 8 December 2021

    Fully booked.

    This practical course is aimed at actuaries at any stage of their career who want to develop their own growth mindset and apply it to their work setting and personal or professional lifelong learning. The content of the course builds on the lecture given by Dr Helen Wright on Growth Mindset as part of the President’s 2021 Lecture series, and will be delivered over a period of 2 months, from mid-October to early December.

  • Spaces available

    Actuaries need to take action now - but how?  With a focus on climate change, this session will provide informed insight to enable you to improve your knowledge and understanding of the issues involved, demonstrate how it will impact advice to your clients, and highlight prospective opportunities for actuaries within pensions and wider fields.

  • Spaces available

    A joint webinar from the CMI Mortality Projections and SAPS committees that will cover: recent mortality experience in the SAPS dataset and the general population; the CMI Model benchmarking survey; the MPC 2021 interim update paper; plans for CMI_2021; and initial thoughts on possible "S4" Series pensioner mortality tables.

    The webinar will be presented by Cobus Daneel (Chair of Mortality Projections Committee) and Matthew Fletcher (Chair of SAPS Committee).

  • Spaces available

    Pension scams have become more prevalent as a result of the pandemic, and Trustees have increased responsibilities to protect members, which means that actuaries need to be in a position to provide advice in this area. Our specialist panel will include a professional trustee, an IFA and head administrator, two of whom are members of PASA.

  • Spaces available

    The Covid-19 pandemic creates a challenge for actuaries analysing experience data that includes mortality shocks.  To address this we present a methodology for modelling portfolio mortality data that offers local flexibility in the time dimension.  The approach permits the identification of seasonal variation, mortality shocks, and late-reported deaths.  The methodology also allows actuaries to measure portfolio-specific mortality improvements.  Results are given for a mature annuity portfolio in the UK

  • Spaces available

    In this webinar, the authors of the 2021 Brian Hey prize winning paper present a new deep learning model called the LocalGLMnet. While deep learning models lead to very competitive regression models, often outperforming classical statistical models such as generalized linear models, the disadvantage is that deep learning solutions are difficult to interpret and explain, and variable selection is not easily possible.

  • Spaces available

    The dominant underwriting approach is a mix between rule-based engines and traditional underwriting. Applications are first assessed by automated rule-based engines which typically are capable of processing only simple applications. The remaining applications are reviewed by underwriters or referred to the reinsurers. This research aims to construct predictive machine learning models for complicated applications that cannot be processed by rule-based engines.

  • Spaces available

    With the Pension Schemes Act 2021 requiring a long term strategy from Trustees and sponsors, choosing a pensions endgame strategy has become even more critical. However, it is important that the endgame options available are adequately assessed before choosing one. With an ever-increasing array of creative and innovative options available, this decision may not be straightforward.