While lifetime pension pools are often developed under the assumption that larger pools are more stable, pool composition matters at least as much as pool size, according to a new report by the Society of Actuaries.

It found while heterogeneity can influence pension benefit outcomes in systematic, predictable and operationally relevant ways, mortality heterogeneity can be either stabilizing or destabilizing depending on how it enters the pool — while the addition of younger plan members generally improves stability by extending the period over which income remains predictable, the addition of older members yields limited diversification benefits and initially reduces stability unless their number is sufficiently large.

Read:........

© Benefits Canada