Long-term care coverage is not integrated into an individual’s retirement strategy. It is an additional public health service that is not considered into private pension funds. Nevertheless, this coverage is not sufficient due to the problems of financial sustainability of the public pension systems. However, there are large sums in pension plans dedicated to paying retirement pensions that can be transformed into support for long-term care coverage. This paper develops a mechanism of pension transformation through the different mortality of the beneficiary when becoming a dependent beneficiary. This mechanism allows the beneficiary to convert their pension to LTC support at their own choice, without increasing the cost of the private pension scheme. The proposed model provides consistency in the pension that a retiree receives and adapts it to a retiree’s life expectancy: the retiree receives a higher pension when he/she needs it most.

A common response in public pension systems to population ageing is to link pensions to observed longevity. This creates an automatic stabiliser that arises from the valuation of a private actuarially funded system. However, no private pension plan mechanism has been articulated to adapt to this ageing in relation to the increased costs it entails. Private pension plans focus on saving for retirement; capital is accumulated to pay for it. However, perceptions of health status change over time and, as retirement age approaches, concerns about long-term care (LTC) increase. Moreover, there is not enough time to plan for it sufficiently in advance. This paper proposes to incorporate a mechanism to add an allowance to the financial pension (retirement, disability, rotation) to cover LTC within a private defined benefit pension plan, in the case of a pensioner becoming dependent. Depending on a pensioner’s health status, both the expected number of payments and their intensity are transformed. For this purpose, a mechanism is defined (through Markov chains) to adapt the amount of LTC support to a beneficiary’s health-related life expectancy. The study’s main contribution is that it establishes a private pension plan model that offers to incorporate dependency aid through this mechanism into the economic pensions without increasing the total cost of the plan. It adapts to life expectancy according to a person’s state (healthy, disabled, dependent).

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