Rethinking the Indexation of Retirement Age: Cohort vs. Period Life Expectancy

Over the past two centuries, life expectancy has risen steadily in industrialized countries, challenging the financial sustainability of pen-sion systems. In systems with indexed pension age, a key issue is whether to use period life expectancy (PLE) or cohort life expectancy (CLE). CLE relies on real cohort data and captures future mortality improve-ments; requiring a full lifespan of data, it can be estimated only for extinct cohorts. To address this, CLE is often estimated using life tables combining past and expected future mortality. In contrast, PLE is basedonmortalityratesobservedinasingleperiod.Itissimplerbutlessaccu-ratethanCLE,particularlywhenassessingtheretirementsystemssus-tainability.Theaimofthispaperistwofold:measuringthegapbetweenCLEandPLEatage65forItalianpopulationusingLee-CarterandRenshaw-Habermanmodelsformortalityprojections,andassessinghowthisgapaffectsthepensionageshift.