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Collective annuities and redistribution

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Author Info

  • CREMER, Helmuth
  • LOZACHMEUR, Jean-Marie
  • PESTIAU, Pierre

    (Université catholique de Louvain (UCL). Center for Operations Research and Econometrics (CORE))

Abstract

In a number of countries one observes a steady decline in defined benefits pensions schemes,public or private, funded or unfunded, and a simultaneous expansion of defined contributionsplans. One of the consequences of this trend is to deprive individuals at the time of theirretirement from the benefit of collective annuitization. Collective annuities can be distinguished from individual ones in two ways. First, they tend to be cheaper because of their scale and because of inefficiencies in private annuity markets. Second they redistribute resources from short-lived to long-lived individuals. Our paper studies the role of collective annuities. Both their redistributive incidence and efficiency aspects are accounted for. We assume that lifetime is uncertain and that there is a positive correlation between longevity and earnings. Collective annuitization (in part or in total) can be imposed on private savings or it can be "bundled" with a redistributive pension scheme. We show that the case for applying collective annuitization to private savings is weak. The case is stronger when collective annuities are associated with redistributive pensions. However, even in that case, collective annuitization may mitigate the redistributive benefits associated with the pension system.

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Bibliographic Info

Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2007096.

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Date of creation: 01 Dec 2007
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Handle: RePEc:cor:louvco:2007096

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Related research

Keywords: annuities; public pensions; differential longevity;

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Cited by:
  1. Pierre Pestieau & Grégory Ponthière, 2012. "The public economics of increasing longevity," Working Papers halshs-00676492, HAL.
  2. Marie-Louise Leroux & Pierre Pestieau & Grégory Ponthière, 2008. "Should we subsidize longevity?," PSE Working Papers halshs-00586236, HAL.
  3. Bommier, Antoine & Leroux, Marie-Louise & Lozachmeur, Jean-Marie, 2009. "On the Public Economics of Annuities with Differential Mortality," TSE Working Papers 09-021, Toulouse School of Economics (TSE).
  4. Marie-Louise Leroux & Pierre Pestieau & Grégory Ponthière, 2008. "Optimal linear taxation under endogenous longevity," PSE Working Papers halshs-00586241, HAL.
  5. Pierre Pestieau & Grégory Ponthière, 2012. "The public economics of increasing longevity," PSE Working Papers halshs-00676492, HAL.
  6. Leroux, M.-L. & Pestieau, P. & Ponthiere, G., 2011. "Longevity, genes and efforts: An optimal taxation approach to prevention," Journal of Health Economics, Elsevier, vol. 30(1), pages 62-76, January.
  7. Pierre Pestieau & Grégory Ponthiere, 2012. "On the Policy Implications of Changing Longevity," CESifo Working Paper Series 3926, CESifo Group Munich.
  8. Marie-Louise Leroux & Pierre Pestieau & Grégory Ponthière, 2008. "Should we subsidize longevity?," Working Papers halshs-00586236, HAL.

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