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

The Society of Actuaries is pleased to make available material for a multi-phased research effort investigating Population Aging and its impact on pension plans. The work is being conducted by a research team from the University of Waterloo and the University of Kent:  Doug Andrews (lead), Steve Bonnar, Lori Curtis, Miguel Leon-Ledesma, Jaideep Oberoi, Kathleen Rybczynski, Pradip Tapadar, and Mark Zhou.

The researchers are looking at the use of an overlapping generations (OLG) model to model the impact of population structure on returns across asset classes.  Several items are available:

  • Phase 1: A comprehensive literature inventory and review summary providing background regarding overlapping generations (OLG) models
  • Phase 1: A description of the proposed model specifications.
  • Phase 2: A comprehensive literature review on demographics and asset returns plus model specifications relating to housing prices.
  • A paper examining the link between population structure and asset values, by generating returns on assets in the presence of demographic change using an Overlapping Generations Model (OLG).
  • A report updating the 2012 risk assessment performed by Porteous et al. The report also provides an economic capital analysis for a stylized U.S. plan with the same member profile and the USS provisions modified to reflect a typical U.S. defined-benefit (DB) plan.
  • Phase 3: A report providing a high-level review of the literature that addresses the relationship between bond prices/yields and demographic variables, a deep dive into one of the papers, and empirical analysis starting with the methodology of that paper and extending to the stability of the relationship over time, to longer-dated bonds, and to the sovereign bonds of various countries.
  • Phase 4: A report outlining demographic-economic scenario generators for Canada, the UK, and the US. The report identifies the sensitivity of asset returns to demographic factors and illustrates the impact of varying the demographic factors on the finances of pension plans.

And overall, as they proceed to new phases of the project, the authors are looking for input from actuaries and others interested in this work. Please contact Doug Andrews, dwa007@hotmail.com, with any feedback and input you have regarding the model specifications.


Literature Review on Demographics and Asset Returns and Model Specifications Related to Housing Prices

Use of Overlapping Generations Model in Modeling Demographic Change Introduction to the Literature Review

Use of Overlapping Generations Model in Modeling Demographic Change – Summary of the Literature Review

The OLG Model Environment 

Population Structure and Asset Values

A Tale of Two Pension Plans: Measuring Pension Plan Risk from an Economic Capital Perspective

A Tale of Two Pension Plans Fast Facts

The Connection between Population Structure and Bond Yields

Population aging, implications for asset values, and impact for pension plans – An international study

Related work to this project can be found at the following links:

The Other Longevity Risk Interim Report

The Other Longevity Risk: Impact of Population Aging on Pension Plan Finances in Canada

Impact of the Choice of Risk Assessment Time Horizons on Defined Benefit Pension Schemes

Thank You

The Society of Actuaries would like to thank the Project Oversight Group (POG) for their input and review.  The POG included representatives of the Canadian Institute of Actuaries, International Faculty of Actuaries, and the Society of Actuaries.

David Abramowitz
Matthew Brady
Jim Bridgeman
David Cantor
Mark Coleman
Garfield Francis
Ian Genno
Frank Grossman
Robert Hudson
Edder Martinez Lazo
Nari Persad
Robert Reitano
Steven Rimmer
Max Rudolph
Howard Simon
James Walton
Asa Waterman
Lane West
Alexandru Zaharia
Catherine Gauld, IFoA Research Project Manager
Steve Siegel, SOA Sr. Research Actuary
Barbara Scott, SOA Sr. Research Administrator

Questions Or Comments?

If you have comments or questions, please email research@soa.org.