People spend the younger part of their lives working hard in exchange for a promise from the government or employers that when they retire, they would be well taken care of. However, due to poor management, low returns on assets, as well as mortality improvement, many pension plans are underwater and headed for bankruptcy.
Restructuring is essential, and many plans offer lump-sum benefits to retirees to reduce longevity risks. Some companies choose to unload their pension risks (either longevity risks or both investment and longevity risks) to insurance industry. It is important for all of us to have a good understanding about funding longer lives as we want to avoid breaking promises made to those who spent their youth and energy to make our society better.
Category: Funding longer lives: Longevity risk, Pension/retirement