Can Longevity Bonds Mitigate the Longevity Risk of the Pension Scheme?

This chapter examines the applicability of longevity bonds in the Malaysian Capital Market. An increase in the life expectancy of individuals raises concern for the annuity market and pension funds in providing a more extended post-retirement benefit. Hence, the pension and insurance industries started to look for an efficient instrument to cross-hedge or transfer the longevity risk. Given the concern for the Malaysian defined benefit pension scheme for public servants, this study examines the feasibility and practicality of introducing the longevity bond to reduce the longevity risk.