Abstract
A new type of retirement bond is proposed called an SM bond. SM bonds are long dated government bonds divisible into two parts: a survivorship (S) part and a mortality (M) part. Each SM bond is associated with a particular age. SM bonds associated with a particular age are only purchasable by (originators) of that age. The SM bond is then splittable into an S and M component. The S part must be retained by the originator, who receives the face value of the bond if he/she is alive at maturity. For originators who die prior to the maturity date, the maturity value of the SM bond is assigned to a mortality pool. The holder of the M part of the bond receives the annual bond coupon, and at maturity a pro rata share of the mortality pool. M bonds are tradable: holders can sell their M bonds to anyone, at any time. It is envisaged different age bonds are issued every year for ages say 30-64 each with say a 35-year term. The market will be regularly informed about the mortality experience, and the market price of the M bonds will vary over time to reflect that experience.
Original language | English |
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Pages (from-to) | 121-149 |
Number of pages | 29 |
Journal | Journal of Risk and Insurance |
Volume | 86 |
Issue number | 1 |
Early online date | 22 Feb 2017 |
DOIs | |
Publication status | Published - Mar 2019 |