Evolution of the Retirement Market and its Effect on Individuals
Table of Contents
Executive Summary iii
1.0 Introduction 1
2.0 Analysis 2
2.1 Shifts in the Retirement Market 2
2.2 Longevity Risk – What It Is and How Individuals Can Manage It 4
2.3 Longevity Protection Products 4
3.0 Conclusion 6
The purpose of this report is to discuss the issue of an ever evolving retirement market, and the risks that it exposes individuals to. The research was done through research papers by the Society of Actuaries prepared by American actuaries; however similar issues are present in Canada. The report also uses research about the different products that can be used to combat longevity on various insurance companies’ websites.
The key points of the report outline the shift that is occurring in the retirement market from defined benefit plans to defined contribution plans, and how it transfers the investment and longevity risk to individuals. Next, it discusses what exactly longevity risk is and some metrics to show how longevity risk is affecting the general population.
The report concludes with a high level overview of some of the products that individuals can use in their retirement years in order to combat longevity risk and transfer some of the risks to insurance companies and the strengths and weaknesses of these products.
Company pension plans play a key role in contributing to an employee’s life upon retirement. At a high level, a pension plan is a retirement plan where the employer, the employees, or both make regular contributions into a fund, which is then used to pay employee retirement benefits. The concept of defined benefit pension plans were made popular shortly after World War II, when wages were frozen and defined benefit plans allowed companies to increase salaries, while deferring...