Thinking Actuary

Demographic Leveraging is the increase in pension risk relative to the financial resources of a pension plan sponsor as the plan population ages.  The risk related to investment and funding strategy is leveraged as the retiree population grows relative to the size of the plan sponsor.  Since the size of the active population or active pension liability is often a reasonable proxy for the size of the plan sponsor, the ratio of the retiree liability to active liability is important.