Longevity risk in the context of pensions from Pillar II of the Slovak pension system

The paper sets out the main points of the legislation, the so-called annuity amendments, which specify how benefits are to be paid at retirement in respect of the lump-sums built up under Pillar II of the Slovak pension system. For a specified model situation a deterministic calculation of the annuity benefit is calculated. The paper then analyses the financial risks related to longevity, to which the life insurer issuing such products is subject. The longevity risk arises because the future mortality of the annuitants may be lower than that expected in respect of the population represented by the mortality tables used. The longevity risk is quantified by reducing the mortality rates by a given percentage and by an age reduction in the mortality table used. Authors then compare the results obtained.