Individual Welfare Gains from Deferred Life-Annuities under Stochastic Mortality
AbstractAt the end of the deferment period a deferred annuity’s policyholder can choose between receiving annuity payouts or the capital accumulated. Considering stochastic mortality improvements, this is a valuable option for the policyholder. Whenever mortality improves less than expected at contract inception, the policyholder will choose the lump-sum and buy an annuity at current market prices. Otherwise, he will retain the more favorable deferred annuity. We use a life-cycle model and calculate the welfare gains of deferred annuities considering stochastic mortality improvements. Deferred annuities are found to substantially improve the welfare of an individual. The option feature is especially valuable in the presence of adverse selection problems. The results derived are relevant for individual retirement planning and pension system design.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by De Gruyter in its journal Asia-Pacific Journal of Risk and Insurance.
Volume (Year): 6 (2012)
Issue (Month): 2 (June)
Contact details of provider:
Web page: http://www.degruyter.com
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Cocco, João F. & Gomes, Francisco J., 2012. "Longevity risk, retirement savings, and financial innovation," Journal of Financial Economics, Elsevier, vol. 103(3), pages 507-529.
- d'Albis, Hippolyte & Thibault, Emmanuel, 2012.
"Ambiguous Life Expectancy and the Demand for Annuities,"
IDEI Working Papers
731, Institut d'Économie Industrielle (IDEI), Toulouse.
- d'Albis, Hippolyte & Thibault, Emmanuel, 2012. "Ambiguous Life Expectancy and the Demand for Annuities," TSE Working Papers 12-323, Toulouse School of Economics (TSE).
- Hippolyte D'Albis & Emmanuel Thibault, 2012. "Ambiguous Life Expectancy and the Demand for Annuities," Post-Print halshs-00721281, HAL.
- Hippolyte d'Albis & Emmanuel Thibault, 2012. "Ambiguous Life Expectancy and the Demand for Annuities," Documents de travail du Centre d'Economie de la Sorbonne 12050, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
- Hippolyte D'Albis & Emmanuel Thibault, 2012. "Ambiguous Life Expectancy and the Demand for Annuities," UniversitÃ© Paris1 PanthÃ©on-Sorbonne (Post-Print and Working Papers) halshs-00721281, HAL.
- Thomas Post & Katja Hanewald, 2010. "Stochastic Mortality, Subjective Survival Expectations, and Individual Saving Behavior," SFB 649 Discussion Papers SFB649DP2010-040, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
- Post, Thomas & Hanewald, Katja, 2013.
"Longevity risk, subjective survival expectations, and individual saving behavior,"
Journal of Economic Behavior & Organization,
Elsevier, vol. 86(C), pages 200-220.
- Thomas Post & Katja Hanewald, 2011. "Longevity Risk, Subjective Survival Expectations, and Individual Saving Behavior," Working Papers 201111, ARC Centre of Excellence in Population Ageing Research (CEPAR), Australian School of Business, University of New South Wales.
- Hanewald, Katja & Piggott, John & Sherris, Michael, 2013.
"Individual post-retirement longevity risk management under systematic mortality risk,"
Insurance: Mathematics and Economics,
Elsevier, vol. 52(1), pages 87-97.
- Katja Hanewald & John Piggott & Michael Sherris, 2011. "Individual Post-Retirement Longevity Risk Management Under Systematic Mortality Risk," Working Papers 201113, ARC Centre of Excellence in Population Ageing Research (CEPAR), Australian School of Business, University of New South Wales.
- Huang, Huaxiong & Milevsky, Moshe A. & Salisbury, Thomas S., 2012. "Optimal retirement consumption with a stochastic force of mortality," Insurance: Mathematics and Economics, Elsevier, vol. 51(2), pages 282-291.
- Huaxiong Huang & Moshe A. Milevsky & Thomas S. Salisbury, 2012. "Optimal retirement consumption with a stochastic force of mortality," Papers 1205.2295, arXiv.org.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Peter Golla).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.