Sooner or later, people will wake up to the fact that the actuaries of more than 100 years ago had come up with a robust and efficient system of providing for old age that did not require every individual to accept longevity and market risk on their own with no options to hedge. Having individuals plan for retirement on the basis that they ‘might’ live longer than average is a flawed approach. Risk pooling is the way to manage this effectively and efficiently. And actuaries can price that risk for trading in the market.
Month: May 2012
The asymmetry of life expectancy
According to Australian statistics, the average male aged 65 can expect to live until age 83. For females, it is age 86. (These statistics are extracted from the Australian Life Tables 2005-07). That might seem like a useful base upon which to plan for retirement. How much savings are needed before someone is able to retire depends on how much they need to meet living expenses and how long they are going to live. Predicting living expenses is a lot easier than predicting your remaining lifespan, but you have to start somewhere.
Twisting the language of tax for political gain
George Orwell wrote of the importance of language as a political tool. Language could be used to manipulate the way people think.
Today’s example of manipulative language comes from the world of superannuation tax. Apparently, using the language of the politically motivated, high income earners in Australia receive greater superannuation tax concessions than do low to middle income earners. Consequently, reform is needed to make the system fairer and levy a higher rate of tax on the superannuation contributions of the high income earners.
Australian Actuary 