Zooming in on ZIP codes

Using socio-economic factors to tailor US pension plan longevity assumptions

7 August 2019

How long retirees live is a key assumption when valuing pension promises. There is ever stronger evidence of variation in lifespan across US society. Given that differences in life expectancy are recognized to be largely driven by lifestyle rather than genetic make-up, how can plan sponsors tailor their longevity assumptions to reflect the characteristics of their participants?

Club Vita has teamed up with Mercer to calibrate our “VitaCurves” longevity model to US pension plan participants. By harnessing the wealth of information captured by ‘zooming in’ on each participant’s ZIP+4 code, together with other key factors such as gender, annuity amount and retirement health, Club Vita can capture the diversity of your pension plan’s demographics, increasing the accuracy and efficiency of longevity modeling.

Our analysis identifies that data readily available in plan records explains differences in life expectancy at age 65 of up to 10 years. Using the VitaCurves model to zoom in on the specific characteristics of individuals within pension plans results in increases and decreases of liabilities of up to 6% relative to the standard Society of Actuaries tables, with a reduction in liabilities on average. 

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Technical appendix - data

For the technical documentation on the data used in this whitepaper please click below.

Technical appendix - methodology

For the technical documentation on the methodology used in this whitepaper please click below.

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