Longevity Heterogeneity in the Twenty-First Century

This final chapter of the book addresses the growing public and political concern that large heterogenous risk pools, that is those that aggregate individuals with very different risk levels—in particular life expectancies and longevity prospects—are unfair and unethical. The background context for this chapter introduces some minority and Indigenous groups objecting to being “pooled” when it is effectively a subsidy for other more fortunate groups. To make this argument, the chapter explains how to compute the expected internal rate of return (IRR) within a pension scheme, and then discusses the longevity gap and philosophical ethics of pension equity from a quantitative basis. It then concludes with an epilogue about the Scottish Church scheme, which “reformed” and then abandoned the (unfair) subsidy in the mid-nineteenth century. A final list of sources for additional reading and references.