Addressing Longevity’ Heterogeneity in Pension Scheme Design

Mercedes Ayuso, Jorge Miguel Bravo, Robert Holzmann

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This paper demonstrates that the link between heterogeneity in longevity and lifetime income across countries is mostly high and often increasing; that it translates into an implicit tax/subsidy, with rates reaching 20 percent and higher in some countries; that such rates risk perverting redistributive objectives of pension schemes and distorting individual lifecycle labor supply and savings decisions; and that this in turn risks invalidating current reform approaches of a closer contribution-benefit link and life expectancy-indexed retirement age. The paper suggests and explores a number of interventions in the accumulation, benefit determination, and disbursement stages to address longevity’ heterogeneity.
Original languageEnglish
Pages (from-to)1-21
JournalJournal of Finance and Economics
Issue number1
Publication statusPublished - 2017


  • Defined Contribution Scheme
  • Two-Tier Contribution Structure
  • Proxied Life Expectancy
  • Tax/Subsidy Structure

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