Who values life annuities more? Is it the healthy retiree who expects to live long and might become a centenarian, or is the unhealthy retiree with a short life expectancy more likely to appreciate the pooling of longevity risk? What if the unhealthy retiree is pooled with someone who is much healthier and forced to pay an implicit loading? To answer these and related questions this paper examines the empirical conditions under which retirees benefit (or may not) from longevity risk pooling by linking the economics of annuity equivalent wealth to actuarially models of aging. I focus attention on the Compensation Law of Mortality which implies that individuals with higher relative mortality (e.g., lower income) age more slowly and experience greater longevity uncertainty. Ergo, they place higher utility value on the annuity. The impetus for this research today is the increasing evidence on the growing disparity in longevity expectations between rich and poor.

Early environmental influences on later-life health and mortality are well recognized in the doubling of life expectancy since 1800. To further define these relationships, we analyzed the associations between early-life mortality and both the estimated mortality level at age 40 and the exponential acceleration in mortality rates with age characterized by the Gompertz model. Using mortality data from 630 cohorts born throughout the 19th and early 20th century in nine European countries, we developed a multilevel model that accounts for cohort and period effects in later-life mortality. We show that early-life mortality, which is linked to exposure to infection and poor nutrition, predicts both the estimated cohort mortality level at age 40 and the subsequent Gompertz rate of mortality acceleration during aging. After controlling for effects of country and period, the model accounts for the majority of variance in the Gompertz parameters (about 90% of variation in the estimated level of mortality at age 40 and about 78% of variation in the Gompertz slope). The gains in cohort survival to older ages are entirely due to large declines in adult mortality level, because the rates of mortality acceleration at older ages became faster. These findings apply to cohorts born in both the 19th century and the early 20th century. This analysis defines new links in the developmental origins of adult health and disease in which effects of early-life circumstances, such as exposure to infections or poor nutrition, persist into mid-adulthood and remain evident in the cohort mortality rates from ages 40 to 90.