How do unisex life care annuities embedded in a pay-as-you-go retirement system affect gender redistribution?

This paper aims to assess gender redistribution when using unisex conversion factors to compute the initial benefit of life care annuities (LCAs) embedded in a pay-as-you-go (PAYG) pension system. We use a method based on actuarial factors to disentangle the hidden redistribution of LCAs with graded benefits. The value of the actuarial factor relies on a multistate framework in which transitions are modeled from the initial health state to the absorbing state. According to our calculations for Australia and the US, the amount of gender redistribution is by no means irrelevant. In spite of the very different biometric data, the results are surprisingly similar for both countries. Risk equalization based on the “equal treatment” of men and women may not be fair, given that age, gender and health state are very significant risk factors in computing the initial benefit in a system covering retirement and long-term care

Unisex life care annuities embedded in a pay-as-you-go pension system: Analysing the issue of gender redistribution

This paper deals with the idea of converting retirement benefit into a life care annuity with graded benefits using a pre-existing public pay-as-you-go pension scheme. Based on accurate biometric data from Australia and the US, the paper shows that using gender-neutral annuity factors to compute the initial benefit involves a large increase in ex-ante gender redistribution compared to a system without long-term coverage. In spite of the very different biometric data, the results are surprisingly similar for both countries. To disentangle the hidden redistribution, a methodology based on conversion (actuarial) factors is used. The value of the actuarial factor relies on a multistate framework in which transitions are modeled from the initial health state to the absorbing state. We also look at what might happen if an annuitant’s initial heath state is not able when they become a beneficiary