How do pension providers project your annual pension, since they don’t know when you are going to die?
In: Economics
They don’t need to know when you’re going to die. They do need to know how many, out of 10,000 or 100,000 people just like you, will die this year, and next, and the year after that, etc. Given enough people similar to you, they can project with pretty much near certainty how many will die over a given time period, and they make their pension projections accordingly.
This is done by actuaries – very smart people who run massive death data sets through sophisticated analyse to build highly predictive models. These models are very good at predicting death rates (after all, there’s lots and lots of data about who died, when they died, how they died and how old they were when they died).
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