Prof. Jane Hutton / Intergenerational Fairness & Pensions: Statistical Analysis, Actuarial Assumptions & Ethics
Intergenerational fairness is an important and ancient concept in society and government. With respect to pensions, intergenerational fairness as well as fairness to women of a certain age have been debated when considering changes in state pension age.
Funded defined benefit schemes which are estimated to have deficits are required to impose deficit recovery payments or change benefits. Current members pay not only for their own future pensions, but also for their predecessors' (and their own) accrued entitlements. It is often assumed that this means younger people paying for older people, and that defined contribution schemes are fairer. However, older generations' pensions contributions have provided productive capital investment and infrastructure used by all ages. Strict intergenerational 'fairness' within a scheme might neglect wider social balance.
Actuarial models require assumptions in order to estimate assets, liabilities, life expectancy and other demographic factors. Consequences of these assumptions affect not only the particular scheme's stakeholders, but wider society. Money used for deficit recovery payments is diverted away from business investment and dividends. A large estimated deficit can bankrupt a company, and put many people out of work. If pension contributions are tax-exempt, the government's income is reduced.
Evaluating assumptions underlying actuarial models provides an ethical challenge to numerate professions.
About the Speaker
Professor Jane Hutton is a statistician at the University of Warwick. Her methodological work in survival analysis, meta-analysis and non-random data is inspired by applications of statistics. Her major research collaborations are in health care. She also provides reports on life expectancy as an expert witness. She served on the Trustee Board of the UK's largest private pension scheme with assets in excess of DKK 700 million.
Professor Hutton has written extensively on ethics and philosophy of statistics, in response to challenges arising from medical research and discussions with international statistical colleagues and philosophers. She teaches regularly at the African Institutes for Mathematical Sciences.