The dawn of a new calendar year is the perfect time to pause and reflect on the past year. In addition to client engagements, Nuovalo is on a mission to explore, collaborate, and share insights across various corners of the globe. The year 2023 was an exciting one for us...
Uruguay: Revolutionizing the Decumulation Market
We completed an extraordinary project on pension reform in Montevideo, Uruguay, where we worked with a team led by the Central Bank and the Ministry of Finance. Our task was to propose and analyze the introduction of a longevity risk-sharing option into Uruguay's defined contribution (DC) system. This initiative set the stage for what could be a landmark development in regional pension reform.
Canada: Pioneering Fully Funded Longevity Risk-Sharing Solutions
Our journey continued with a significant project for one of the largest DC plans in Canada to design a fully funded lifetime income solution that incorporates longevity risk-sharing. This project was done in close collaboration with Eckler, Canada’s largest independent pension consulting firm. Retirement plan regulation occurs at the provincial level in Canada, and we are eager for the first provinces begin to adopt reforms that will allow DC plan participants to obtain lifetime income at a very low cost through pooling longevity risk with other participants.
Chile: Advancing Research, Policymaking and Tackling Labor Informality
In collaboration with the pensions regulator in Chile, we completed an extensive research paper that has been accepted for publication in The Geneva Papers on Risk and Insurance. This accomplishment reflects our commitment to advancing the field of pension management and creating academic-grade proposals to introduce longevity risk-sharing in different jurisdictions within Chile.
Concurrently, we are playing a pivotal role in a blue-ribbon roundtable addressing labor informality, a critical issue affecting millions in Chile. These efforts underscore our dedication to advancing the study of practical solutions for pervasive economic challenges that affect retirement income. Indeed, Manuel García Huitrón, one of Nuovalo´s founders, was appointed technical secretary of an influential private sector roundtable comprised of a diverse group of leaders, economists, lawyers, and specialists and tasked with studying and devising proposals to tackle labor informality affecting 2.4 million Chilean workers. Labor informality, which impacts nearly 27% of the Chilean employed population, has far-reaching consequences on individuals and the economy, making this collaborative effort a crucial step toward a more formalized and protected labor market in Chile.
Global Presence: Insights and Influences Across Continents
Our team has been prominent at various international conferences throughout the year, disseminating our expertise on DC risk-sharing arrangements for lifetime income. Our engagements included:
Washington DC, USA: The 2023 Global Pensions Programme hosted by the Inter-American Development Bank (IDB) and co-organized with the London School of Economics, PinBox Solutions, and Novaster. The audience comprised pension regulators, policymakers from Latin America, and global experts on relevant topics. During the conference, the IDB launched a flagship publication entitled “The Future of Work in Latin America and the Caribbean: How to Move Towards Sustainable Pensions for longer-lived Societies?” coauthored along with two of Nuovalo´s founders. Download the publication here.
Philadelphia, USA: The 2023 Pension Research Council symposium on Diversity, Inclusion, and Inequality: Implications for Retirement Income Security and Policy, which explored the determinants and dynamics of socioeconomic inequality in retirement income outcomes. Nuovalo is keenly interested in this subject and ways to promote fairness within pension systems worldwide.
Austin, USA: The 2023 Innovation Forum hosted by Sage Investment Advisory, where we presented on Innovations in Retirement Decumulation: Pooled Longevity Risk Pooling.
Mexico City, México: Our journey led us to Mexico in October, where we joined local industry leaders and policymakers at the Encuentro Amafore 2023, organized by the local pension funds association. The Mexican pension system individual DC system is about to start its decumulation phase. We stressed the importance of holistic risk management in pension decumulation, covering conversion, longevity, and inflation risks. Our insights also touched on international best practices, including robust choice architectures, annuity market promotion, mutualization of retirement funds, dynamic mortality tables, and fostering transparency and competition in pension product markets.
Copenhagen, Denmark: The 2023 Discussion Forum hosted by the International Centre for Pension Management (ICPM). The annual event brings together leading minds in the field of pension management to facilitate insightful discussions on critical industry topics. Day two of the program focused on Longevity Risk and Decumulation Strategies, where Nuovalo presented advances in the practical implementation of longevity risk sharing at low cost.
Salzburg, Austria: Nuovalo proudly participated in the KFAS-Salzburg Global Leadership Initiative, held against the backdrop of Schloss Leopoldskron in Salzburg, Austria. This inaugural cohort brought together 34 leaders from diverse backgrounds and over 20 countries to explore global challenges such as Demographic Transition, Financial Sustainability, Diverging Values, Immigration, and Intergenerational Mobility. As we look forward to follow-up network meetings and collaborative endeavors in 2024, our commitment to shaping a sustainable future remains unwavering.
Maastricht, The Netherlands: We immersed ourselves in the ICPM-Maastricht Program on Trust-Building Through Effective Communications, a transformative journey into the importance of strategic communication in pensions and emphasizing the need for trust-building and bridging ideological divides in polarized times. We wholeheartedly recommend this program to industry peers seeking a blend of theory and practical wisdom.
São Paulo, Brazil: We shared insights on Innovations for the Decumulation Stage with Brazilian pension executives at the International Seminar 2023 of the ABRAPP – Associação Brasileira das Entidades Fechadas de Previdência Complementar. Our presentation explored the transformative potential of Longevity Income Funds in Latin America's pensions landscape.
Brussels, Belgium: We were invited by the National Bank of Belgium to give a lecture at their Actuarial Science Seminar titled Modern Pensions: How to protect retirees at minimum cost. The talk focused on the merits and practical implementation of longevity risk-sharing solutions, emphasizing efficient design, actuarial fairness, transparency, and the importance of maintaining the fully funded status of every participant’s account to ensure the ongoing sustainability of the plan.
Tegucigalpa, Honduras: Nuovalo participated at a conference hosted by the Banco Interamericano de Desarrollo and the Honduran Comisión Nacional de Seguros y Valores (CNSV), where we spoke on two topics: 1) The Importance of Local Capital Markets in Promoting Economic Development, focusing on the role of retirement bonds in capital markets development, and 2) Innovative Products for Managing Longevity Risk, exploring cutting-edge longevity income pool solutions in the pensions landscape.
Global: The release of the Mercer-CFA Global Pensions Index 2023 marked an exciting milestone in the field. One of Nuovalo´s cofounders is part of the International Academic Board of the project. This edition offers valuable insights into global pensions and delves into the intricate relationship between pensions and artificial intelligence (AI).
Global: One of the co-founders at Nuovalo is an esteemed member of the global Selfies for Retirement Security collective dedicated to assisting governments in adopting retirement bonds. A notable accomplishment in this realm is Brazil's launch of its variant of these bonds in January 2023, accompanied by an education bond that follows akin design principles. This effort is part of a broader effort to guide governments toward establishing more efficient and inclusive pension systems. Retirement bonds offer a viable decumulation strategy for the initial 20 years of retirement. Combined with Nuovalo's longevity income pools, they provide a comprehensive solution for effectively managing longevity risk while also providing for liquidity needs.
Latin America: A Nuovalo co-founder led a discussion at the JASPER Forum, a platform for gathering experts renowned for its focus on pension innovation. Alongside esteemed experts Diego Valero and David Tuesta, we delved into the dynamics and challenges of Latin America's defined contribution pensions. The JASPER forum provides a unique platform to exchange groundbreaking ideas and insights with a global audience of professionals and academics. Our discussion was an exploration of current practices and an opportunity to envision new directions for the future of pension systems in Latin America. Thanks to John Mitchem and Jorik van Zanden, founders of the Forum, for this prestigious opportunity to contribute to such an impactful event.
Research
Throughout 2023, we continued to uphold our reputation as a research-driven startup. Our commitment to contributing valuable insights into the pension sector is evident through our publications this year. Here's a brief overview of our key contributions:
§ The Future of Work in Latin America and the Caribbean: How to Move Towards Sustainable Pension Systems for Longer-Lived Societies?, published by the Inter-American Development Bank, with one of our co-founders as the lead author. This flagship publication aims to redefine the narrative around aging and pensions in Latin American societies, transforming it into a landscape of opportunities.
§ Addressing the duration puzzle and retirement income risk of defined contribution pension plans, featured in the prestigious Journal of Banking & Finance, this paper was co-authored by one of our co-founders. The paper introduces a novel metric to align pension fund performance with long-term retirement goals and introduce target-income strategies that minimize retirement income risk, offering superior outcomes compared to typical target-date funds, as can account for and manage unexpected changes in average longevity.
§ Is my pension fund more expensive? Estimating equivalent assets-based and contribution-based management fees, published by the Journal of Business Research and co-authored by a Nuovalo co-founder. This article presents a groundbreaking closed formula for calculating fees proportional to contributions, offering a new perspective on the equivalence between contribution-based and AUM-based fee systems.
§ In addition to these, our co-founders have authored or co-authored several other thought-provoking publications, including:
o 'How do classical music and the future of pensions connect?' (link)
o 'Lifetime income: an opportunity for innovation in Latin America and the Caribbean' (link)
o 'Pensions: What can we learn from countries with more advanced aging processes?' (link)
These works underscore our enduring commitment to pioneering research in pensions and longevity.
Join Our Journey!
The world of pension management is constantly evolving. At Nuovalo, we are proud to lead the charge in pursuit of better outcomes for people. Our experiences in 2023 have only strengthened our resolve to drive innovation and share our knowledge globally. If you are interested in learning more about our projects or have an interest in implementing low-cost noninsured risk-pooled solutions for lifetime income within defined contribution plans or individual retirement accounts, please contact us. Let's collaborate to shape the future of retirement security.
