pension for a 60 - year - old, 1990 - 2035 25 years with early retirement benefits and state pension political agreement on velfærdsaftale welfare adjustment, 2006 langsigtsniveau long - term level forslag om fremrykning new proposals 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2035 source : labour market commission danmarks nationalbank retirement saving is exposed to a number of risks depending of the form of saving. however, longevity and macroeconomic risks affect all forms of retirement saving, cf. slide 10. risks affecting retirement saving macroeconomic risks longevity risk state pension government budget deficit occupational pension defined benefit decline in corporate profits defined contribution inflation risk danmarks nationalbank private pension investment risk depending on the type of pension plan, it is either the sponsor or the retiree that bears the longevity and investment risk. as the defined benefit retirement plans are being reduced in favour of defined contribution plans the risks are shifted from the sponsors to individuals. some sponsors have attempted to renegotiate the agreed pension plans with the retirees within the scope of the pension contracts to take into account the longevity risk. anyhow, appropriate risk management for interest rate, inflation and longevity risks are needed, cf. slide 11. types of pension plans defined benefit plan defined contribution plan • benefit determined by a set formula • benefit depends on contributed amount and investment returns • sponsor bears investment or longevity risk • retiree bears investment and longevity risk no matter who bears the risks, instruments for investment and longevity risk bearing and hedging are needed danmarks nationalbank long - term government bonds the ultra - long government bonds are not a recent invention. perpetuals were used in war financing for example in united kingdom that in 1919 issued two ultra - long bonds, 57 - year " victory bond " and 71 - year " funding loan ". today many governments have long - dated outstanding loans with maturities up to 50 years. the issued ultra - long bonds tend to end up in investors'buy - and - hold positions, which affects bond liquidity. in germany, for instance, the turnover ratio of the 10 - year bund is almost the double compared to the 30 - year bund, cf. slide 12. government bonds with maturities over 30 years, oecd - countries overview of long - term governm ent bonds count ry lat est mat urit y nominal / linker aust ria........

government issuance of longevity bonds yield curve pros : could provide an unbiased benchmark similar to government yield curve could be a catalyst in market development per cent 3, 5 2, 5 m aturit y increasing old age dependency ratio, oecd countries age 80 + 75 - 79 70 - 74 65 - 69 60 - 64 55 - 59 50 - 54 45 - 49 40 - 44 35 - 39 30 - 34 25 - 29 20 - 24 15 - 19 10 - 14 5 - 9 0 - 4 cons : governments are heavily exposed to longevity risk danmarks nationalbank million in the end, nothing is certain in life except death and taxes, cf. slide 23. the need for development in market for longevity risk transfer is apparent. in view of the innovation seen in other financial areas, it is not impossible that a private market for longevity bonds will emerge, although not necessarily based on the product structures known today. the end nothing is certain in life except death and taxes. franklin, 1789 thank you for your attention danmarks nationalbank