Managing longevity risk in the local context to ensure sustainability

Abstract

Purpose: Drawing upon the distinctive characteristics and statistical insights of the Maltese context, this dissertation intended to refine financial management strategies in view of longevity considerations. This embraced the optimisation of practices across governmental bodies, private entities and individual stakeholders, all aimed at collectively grappling with the ascending confrontation of longevity risk. Consequently, the study took on a comprehensive journey to apprehend the intricacies of longevity risk and its far-ranging implications, with a keen target on identifying the decisive variables shaping longevity outcomes. Subsequently, it intended to proffer enduring risk management solutions through a punctilious comparative analysis, juxtaposing Malta's current landscape with that of other European Union countries. This assessment included an exhaustive evaluation of local risk management methodologies, identifying areas for improvement and proposing sustainable strategies to curtail unnecessary expenditures and enhance long-term financial resilience. Design: A mixed-method approach was applied to implement the research objectives. Initially, questionnaires were disseminated to the general public to identify variables influencing the risk. Subsequent statistical analyses, like Exploratory Factor Analysis and Structural Equation Modelling, reaffirmed these variables. Further research was directed to address the remaining objectives, including comparative analysis and risk management strategy proposals. Thematic analysis was then implemented to the qualitative data from both questionnaire responses and supplementary research. Findings: The Exploratory Factor Analysis exhibited seven factors influencing longevity, with three of them further approved by Structural Equation Modelling. These factors presented full confirmation for four out of nine hypotheses and partial confirmation for the remaining five. Key influencers on longevity comprised genetics, personal well-being, health and retirement, while factors like environment, lifestyle, socio-economic status, education and employment received partial confirmation. The comparative analysis accentuated weaknesses and areas for improvement within these factors, leading to the exploration of potential risk management strategies. An intriguing observation emerged: a significant portion of the Maltese populace, particularly the respondents, revealed limited awareness of longevity and its implications, requiring extensive financial literacy education nationwide. Conclusions: The findings allow governmental bodies, private entities and individual stakeholders to concentrate their efforts on the identified factors and risk management strategies. This enables them to ease both financial and non-financial implications of the risk, cultivating the development of effective financial management practices. Value: The author intends to shed light on the critical importance of addressing longevity risk, bearing in mind the increasing life expectancies, limited financial literacy and risk awareness, and the escalading living costs, all contributing to heightened longevity risk nationwide.