The Lifetime Harvesting Plan: Smoothed Annuities with Sharing of Mortality, and Averaging of Investment, Risks

Abstract

This paper considers the design of pooled life annuities for Australian retirees. In particular it considers how mortality can be pooled, and investment returns smoothed, to provide for consumption that is greater and smoother – without the risk of totally exhausting account balances, and without the need for significant shareholder capital. It is also necessary to integrate payments with the age pension and to take regulatory minima into consideration. The results are illustrated for Australian returns since 1956.