Isaac Marchand

Title: Heterogeneity in lifetime pension pools
Date: March 18th, 2026
Time: 3:30pm
Location: LIB 7200/ Zoom
Supervised by: Jean-François Bégin and Barbara Sanders

Abstract:

As defined benefits pensions decline, lifetime pension pools have emerged as flexible decumulation solutions. However, these arrangements introduce benefit variability driven by investment and mortality risks, especially in heterogeneous pools. This thesis examines how member heterogeneity affects income stability under whole-pool adjustment rules. We employ the stable income period or SIP—a time-based measure of the horizon over which
benefits remain within a prescribed band—as our primary metric. Using Monte Carlo simulations, we analyze the impacts of mortality and wealth heterogeneity. Results show that while larger pools generally improve stability, heterogeneity can either enhance or reduce stability depending on the interaction between relative age, wealth, and group size. To address the SIP’s high computational cost, we develop an analytical proxy and a variance reduction technique. Finally, we demonstrate how the SIP serves as a practical design tool for setting pooling rules and contribution limits.

Keywords: Group self-annuitization schemes; income stability; mortality and wealth heterogeneity; decumulation design; variance-reduction technique