Hazel Bateman, Jeanette Deetlefs, Isabella Dobrescu, Ben Newell, Andreas Ortmann and Susan Thorp

Low levels of non-default decision making among superannuation members in Australia are assumed to be evidence of a lack of interest and capability.

Using member records and survey data from a large Australian superannuation fund, we test the relationship between attitudes towards retirement savings and observable levels of non-default activities (such as making voluntary contributions, choosing or changing investment options and changing insurance cover).

Kostas Mavromaras and Rong Zhu

In this paper we estimate the interdependence of labour force participation decisions made by Australian couples from 2001 to 2011. We focus on couples with a mature age husband, and estimate the interdependence of the participation decision of the couple.

We fnd that the decision of a wife to work or not influences positively, and in a casual fasion, the decision of her husband to work or not.

Ermanno Pitacco

We address life annuities and pensions, looking in particular at transfers/sharing of biometric risks, i.e. risks related to the annuitant's lifetime and health status, involved by the policy conditions or the pension plan rules.

Julie Agnew, Hazel Bateman, Christine Eckert, Fedor Iskhakov, Jordan Louviere and Susan Thorp

Using an online incentivised discrete choice experiment, we study how well individuals judge financial advice and whether factors other than advice quality influence their evaluations. We find evidence that some individuals rely on extraneous signals to judge advice quality and observe some persistency in adviser choice over time.

Hazel Bateman and Kevin Liu

Using data from the China Household Finance Survey - a new nationally representative survey of 8,438 households we critically assess the Chinese pension system using both individual and economy-wide criteria.

We advocate that the key to sustainable reform will be the establishment of a regulatory framework with well-defined governance structures for both publicly and privately managed pension assets.

Craig Blackburn, Katja Hanewald, Annamaria Olivieri and Michael Sherris

This paper assesses the impact of longevity risk management on insurer shareholder value and solvency for an annuity portfolio.

George Kudrna, Chung Tran and Alan Woodland

In this paper we develop an overlapping generations (OLG) model that incorporates non-stationary demographic transition paths to study the dynamic fiscal effects of demographic shift in Australia. Our main results are summarised as follows. First, demographic shift results in lower per capita output and increased capital outflows. Second, the changes in demographic structure lead to a shift in the tax base from labor income to capital income and consumption. Third, there are substantial increases in old-age related expenditures including health, aged care and pensions.

Ramona Meyricke and Michael Sherris

The cost of capital is an important factor determining the premiums charged by life insurers issuing life annuities. Insurers will be able to offer more finely priced annuities if they can reduce this cost whilst maintaining solvency. This capital cost can be reduced by hedging longevity risk with longevity swaps, a form of reinsurance. We assess the costs of longevity risk management using longevity swaps compared to costs of holding capital under Solvency II.

Rafal Chomik, John Piggott and Bei Lu

New ways of thinking about retirement and employment: Trends, barriers, and policy options.

This brief is a translation of the Mature-age Labour Force Participation Research Brief.

Shang Wu, Ralph Stevens and Susan Thorp

Modeling of subjective survival is critical to the use of mortality expectations in economic models and the life insurance industry. Subjective scaling factors that are used to adjust average survival probabilities for individual expectations are often based on a single observation of personal life expectancy and assumed to be constant for any projected target age. Using survey data on subjective survival probabilities over a range of target ages and from an array of age cohorts, we estimate individual subjective scalings of population mortality probabilities.

Rafal Chomik, John Piggott and Bei Lu

New ways of thinking about retirement and employment: Trends, barriers, and policy options.

This brief is a translation of the Mature-age Labour Force Participation Research Brief.

Daniel H. Alai, Zinoviy Landsman and Michael Sherris

Systematic improvements in mortality increases dependence in the survival distributions of insured lives. This is not accounted for in standard life tables and actuarial models used for annuity pricing and reserving. Furthermore, systematic longevity risk undermines the law of large numbers; a law that is relied on in the risk management of life insurance and annuity portfolios. This paper applies a multivariate Tweedie distribution to incorporate dependence, which it induces through a common shock component.

Katja Hanewald, Thomas Post and Michael Sherris

We study the optimal product choice of home equity release products from the homeowner's perspective in the presence of longevity, long-term care, house price, and interest rate risk.

Loretti I. Dobrescu

This paper develops a dynamic structural life-cycle model to study how heterogeneous health and medical spending shocks affect the savings behavior of the elderly. Individuals are allowed to respond to health shocks in two ways: they can directly pay for their health care expenses (self-insure) or they can rely on health insurance contracts. There are two possible insurance options, one through formal contracts and another through informal care provided by family.

Hal Kendig and Nina Lucas

Social change in Australia over the post WW II era -including increasing prosperity, massive immigration, and increasing public support - has brought overall improvements in intergenerational relationships and outcomes for older people. The future, however, is more problematic, especially for vulnerable individuals and families over the life course, in the context of rapid societal ageing, uncertain economic prospects, and changing political ideologies.

Michael Sherris and Qiming Zhou

Mortality models used to assess longevity risk and retirement funding have been extended to stochastic models with trends and systematic risk. Systematic risk cannot be readily diversified in an insurance pool or pension fund. It is an important factor in assessing solvency and highlighting the tail risk in longevity insurance and pension products. This paper overviews recent developments in models for mortality heterogeneity and uses a model calibrated to both population mortality and health condition data to consider the impact of model risk and heterogeneity in assessing solvency and tail risk for longevity risk products.

Joelle H. Fong, Adam W. Shao and Michael Sherris

We apply generalized linear models to evaluate disability transitions for individuals in old age based on a large sample of U.S. elderly. We estimate a multi-state model for long-term care insurance applications, and find significant differences in disability rate patterns and levels from the commonly-used Robinson (1996) model.

Rafal Chomik

Population ageing is unprecedented, pervasive, enduring and profound. This fact sheet provides an introduction to the concepts, definitions, issues and projections of one of the key social challenges of the 21st century.

Rafal Chomik

With total health spending in the region worth over a trillion dollars in 2010 and demand for healthcare continuing to grow, Asian governments will have a tremendous challenge meeting and funding this demand.  

Rafal Chomik

Asia's general reliance on defined benefit schemes could potentially lead to unfunded liabilities similar to those experienced in some countries in Europe, once the tipping point is reached.

Some segments of the population lack meaningful pensions, a feature of many developing economies in the region, which means the whole system of retirement income in Asia needs urgent attention.

Rafal Chomik and John Piggott

While Asia's population is expected to increase by one billion people in the next thirty years, the significant demographic story is the change in its age structure.

Cagri S. Kumru and Saran Sarntisart

Self-control problem is an important determinant of individuals' economic decisions. The decision maker's future utility is affected by unwanted temptation. This implies that implications of various government policies would differ if one incorporates these behavioural aspects. Public finance instruments could, however, be used to correct anomalies created by temptation. The purpose of this paper is to examine the question of optimal taxation when individuals have self-control problems.

Daniel Cho, Katja Hanewald and Michael Sherris

We analyse the risk and profitability of reverse mortgages with lump-sum or income stream payments from the lender's perspective. Reverse mortgage cash flows and loan balances are modelled in a multi-period stochastic framework that allows for house price risk, interest rate risk and risk of delayed loan termination.

Shiko Maruyamaya and Meliyanni Johar

When siblings are concerned for the well-being of their elderly parents, the costs of care giving and long-term commitment create a free-rider problem. If siblings living near their parents can share the costs, this positive externality exacerbates the under-provision of proximate living. Location decisions allow siblings to make a commitment to not provide long-term support for parents, and if decisions are made in birth order, elder siblings may enjoy the first-mover advantage. To quantify these effects, we study siblings' location decisions relative to parents by estimating a sequential participation game that features rich heterogeneity.

Vanessa Loh and Hal Kendig

An uncertain economic outlook and the certitude of an ageing population highlight the importance of productivity across all age groups for Australia's future. This paper provides national findings on both paid, tax-generating and unpaid, voluntary productivity across the life course, focusing primarily on the baby boomer cohort now in late middle age.

Hazel Bateman, Isabella Dobrescu, Ben R. Newell, Andreas Ortmann and Susan Thorp

We report the results of two laboratory experiments that study how university student and staff participants chose retirement savings investment options using 'user‐friendly' information prescribed by regulators.

Adam Wenqiang Shao, Michael Sherris and Katja Hanewald

This paper estimates and compares methods of constructing disaggregated house price indices from existing house price models using individual sales data for Sydney. Nine alternative house price models are selected to cover the most frequently used methods in the literature: the mean model, median models (standard and stratified), hedonic models (restricted and unrestricted hedonic), repeat-sales models (age-adjusted and Case-Shiller weighted), and a hybrid of the hedonic and repeat-sales model.

Ramona Meyricke and Michael Sherris

This paper quantities the financial impact of frailty on underwritten annuities. The heterogeneity implied by underwriting factors and frailty is quantified by fitting Generalized Linear Mixed Models to longitudinal data for a large sample of US males.

Daniel Alai, Hua Chen, Daniel Cho, Katja Hanewald and Michael Sherris

In this paper, we compare cash flows and risk profiles from the provider's perspective for reverse mortgage and home reversion contracts.

Severine Gaille, Michael Sherris

This paper applies VECM to cause-of-death mortality rates in order to assess the dependence between these competing risks. We analyze the five main causes of death in Switzerland.

Cagri S. Kumru and Saran Sarntisart

In this paper we provide a model that aims to answer the following questions: First, under what conditions an alternative banking system would arise? Second, what are the growth, and welfare implications of these banking systems?

Andy Wong, Michael Sherris, and Ralph Stevens

This paper uses stochastic mortality and interest rate models to assess life and annuity capital requirements and quantify the benefits of natural hedging taking into account relative profit loadings on products.

Daniel H. Alai, Severine Gaille and Michael Sherris

Changes in underlying mortality rates significantly impact insurance business as well as private and public pension systems. Individual mortality studies have data limitations; aggregate mortality studies omit many relevant details. The study of causal mortality represents the middle ground, where population data is used while cause-of-death information is retained. We use internationally classified cause-of-death categories and data obtained from the World Health Organization. We model causal mortality simultaneously in a multinomial logistic framework.

Heather Booth, Tim Windsor, Heather Crawford and Pilar Rioseco

This research report was prepared for the National Seniors Productive Ageing Centre by CEPAR Associate Investigators Heather Booth and Tim Windsor and Heather Crawford and Pilar Rioseco.

Julie R. Agnew, Hazel Bateman, and Susan Thorp

We implement a customised survey to a representative sample of 1,024 Australians to examine the relationship between financial literacy and retirement planning.

Overall we find aggregate levels of financial literacy similar to comparable countries with the young, least educated, unemployed and those not in the labor force most at risk. However, unlike the international norm, we find that financial skills increase with age.