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LIFE CARE ANNUITIES (LCA) EMBEDDED IN A NOTIONAL DEFINED CONTRIBUTION (NDC) FRAMEWORK

Published online by Cambridge University Press:  09 February 2016

Javier Pla-Porcel ,
Manuel Ventura-Marco  and
Carlos Vidal-Meliá
Javier Pla-Porcel
Affiliation:
Actuarial Department, SOS Seguros y Reaseguros, S.A., Calle Ribera del Loira 4-6, 28042 Madrid. (Spain) Email: [email protected]
Manuel Ventura-Marco
Affiliation:
Department of Financial Economics and Actuarial Science, University of Valencia, Avenida de los Naranjos s.n., 46022 Valencia. (Spain) Email: [email protected]
Carlos Vidal-Meliá*
Affiliation:
Department of Financial Economics and Actuarial Science, University of Valencia, Avenida de los Naranjos s.n., 46022 Valencia. (Spain)
*
Email: [email protected]
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Abstract

This paper examines the possibility of embedding public long-term care (LTC) insurance within the retirement pension system, i.e. introducing life care annuities into a notional defined contribution framework. To do this, we develop a multistate overlapping generations model that includes the so-called survivor dividend and give special attention to the assumptions made about mortality rates for dependent persons and LTC incidence rates, which largely determine the contribution rate assigned to LTC. The proposed model could be of interest to policymakers because it could be implemented without too much difficulty, it would universalize LTC coverage with a “fixed” cost, and it would discourage politicians from making promises about future LTC benefits without the necessary funding support.

Keywords

LCANDCpay-as-you-goLTC insurancesocial security
Type
Research Article
Information
ASTIN Bulletin: The Journal of the IAA , Volume 46 , Issue 2 , May 2016 , pp. 331 - 363
Copyright
Copyright © Astin Bulletin 2016 

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