The move from defined-benefit to defined-contribution retirement savings plans in many countries has shifted the burden of longevity risk to individuals. Insured annuities are a solution, but their embedded guarantees are costly. As a result, interest in nonguaranteed lifetime income solutions is growing around the world.

These solutions, which go by various names such as dynamic pension plans, modern tontines, pooled annuity funds, group self-annuitization, and collective defined contribution, do not guarantee a specific income amount but instead allow income to vary over time (both upward and downward) in response to realized investment and mortality experience. Because longevity risk is pooled among plan participants rather than borne by a third party, there are no risk reserve or risk hedging requirements, meaning that significantly more of a plan’s assets can be delivered to participants in the form of lifetime income.

This talk will focus on the merits and the practical implementation of these solutions with an emphasis on efficient design, actuarial fairness, transparency, and the importance of maintaining the fully funded status of every participant’s account to ensure the ongoing sustainability of the plan.