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Pension funds connect generations because of the long-term horizon of their transactions. Individuals pay pension contributions over several decades and, after retirement, ideally receive benefits for many years. At the same time, new cohorts continuously enter the workforce during an individual’s career, meaning that active workers and retirees always coexist. At any given moment, one group is contributing to the fund and building up pension rights, while another is receiving benefit payments. Over time, these successive periods shape the cash-flow model of pension systems.
Although this description may seem straightforward, the relationship between generations is far more complex. Modelling consists of all the future states of the future development of interrelated economic, demographic, and legal factors, all of which are highly likely to change over such a long-time horizon. These factors eventually change the financial sustainability or benefit adequacy of the pension fund and so favour certain groups of members over others.
Our aim is to provide pension actuaries and other interested experts with an overview of topics and methods in relation to the discussion of intergenerational fairness. This web session continues the first session in October 2025 and now dives deeper into actuarial modelling.
First, we will briefly introduce the concept of intergenerational fairness for those who couldn’t attend last October. This means that this session is generally open to all interested participants. According to the equity concept, similar careers should result in similar benefits, or even the value of the benefits should be equal to the contributions. From a different perspective, insured persons should get their (socially) agreed level of pensions over long periods under the same conditions, and even socially agreed needs also should be financed from the fund. These approaches lead to different conclusions from actuarial fairness to social fairness.
Both approaches represent the benefit adequacy aspect of pensions. Next, we deal with real life issues, where the financial sustainability of the pension systems is the hard limit for delivering pensions. At this layer external factors, like economic and demographic developments and, not independently, investment conditions matter. In case of funded pensions financial sustainability translates into funding and cost issues. Modelling pension systems is making assumptions about economic and demographic parameters.
The adequacy and sustainability objectives are contradictory by definition, and we must balance between them. Socio-economic groups embrace this duality of the problem. First, we discuss the traditional deterministic and stochastic or pricing model approaches. Next a generalized approach will be introduced, a multi-state model modelling the life paths of typical socio-economic groups. Deriving the economic and demographic parameters and managing a meaningful number of socio-economic groups is leading to a complex multi-state model. Predictive analytics and modelling AI tools may help overcome difficulties with scarce and not strongly related data and complex output interpretations.
Early-bird discount is available for bookings made by 15 October 2026. |
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Coming soon... |
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Advanced Applications of Generative AI in Actuarial Science | 1/2 October 2026 in Vilnius
Calculation of Life Insurance Products by Means of Markov Chains | 8 October 2026
Assets and Liabilities Management Part 1: Introduction | 14-16 October 2026
Explore our website for more information and discover all our upcoming events. For more insights, updates, and a bit of actuarial fun, feel free to follow us on LinkedIn! |