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The purchase of individual life-annuities: a description of the french institutional setting

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  • J. Ph.

    (Insee)

  • GAUDEMET

    (Insee)

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    Abstract

    In addition to the pensions delivered by the mandatory social security system, different schemes offer in France the option to purchase private life annuities. These individual annuities are provided by numerous and heterogeneous institutions that rely on more or less rigorous prudential rules and are subjected to highly disparate fiscal laws. Mortality and financial risks are differently covered whereas the accessiblity to life annuities appears unequal. Undoubtedly this disparity impairs the development of such products: very few individuals purchase private life annuities and the total amount of annuitized financial assets is rather low. Indeed, various restrictive institutional factors tend to strengthen the natural propensity of individuals to favour liquid and transferable assets. Although long term savings benefit from an attractive taxation, it is generally not fiscally advantageous to annuitize the accumulated wealth. Other factors lead to inefficiency on the market for annuities: limitation to competition, constraints on the use of mortality tables favouring adverse selection, restrictive prudential rules.

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    File URL: http://www.insee.fr/fr/publications-et-services/docs_doc_travail/G2001-08.pdf
    File Function: Document de travail de la DESE numéro G2001-08
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    Bibliographic Info

    Paper provided by Institut National de la Statistique et des Etudes Economiques, DESE in its series Documents de Travail de la DESE - Working Papers of the DESE with number g2001-08.

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    Date of creation: 2001
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    Handle: RePEc:crs:wpdeee:g2001-08

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    Related research

    Keywords: life-annuities; pension schemes; adverse-selection;

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    1. John B. Shoven, 1999. "The Location and Allocation of Assets in Pension and Conventional Savings Accounts," NBER Working Papers 7007, National Bureau of Economic Research, Inc.
    2. Jeffrey R. Brown & Olivia S. Mitchell & James M. Poterba, 2001. "The Role of Real Annuities and Indexed Bonds in an Individual Accounts Retirement Program," NBER Chapters, in: Risk Aspects of Investment-Based Social Security Reform, pages 321-370 National Bureau of Economic Research, Inc.
    3. Friedman, Benjamin M & Warshawsky, Mark J, 1990. "The Cost of Annuities: Implications for Saving Behavior and Bequests," The Quarterly Journal of Economics, MIT Press, vol. 105(1), pages 135-54, February.
    4. Olivia S. Mitchell, 1999. "New Evidence on the Money's Worth of Individual Annuities," American Economic Review, American Economic Association, vol. 89(5), pages 1299-1318, December.
    5. Martin S. Feldstein & Elena Ranguelova, 2002. "The Economics of Bequests in Pensions and Social Security," NBER Chapters, in: The Distributional Aspects of Social Security and Social Security Reform, pages 371-400 National Bureau of Economic Research, Inc.
    6. Zeldes, Stephen P, 1989. "Optimal Consumption with Stochastic Income: Deviations from Certainty Equivalence," The Quarterly Journal of Economics, MIT Press, vol. 104(2), pages 275-98, May.
    7. Brown, Jeffrey R., 2001. "Private pensions, mortality risk, and the decision to annuitize," Journal of Public Economics, Elsevier, vol. 82(1), pages 29-62, October.
    8. Benjamin M. Friedman & Mark Warshawsky, 1990. "The Cost of Annuities: Implications for Saving Behavior and Bequests," NBER Working Papers 1682, National Bureau of Economic Research, Inc.
    9. Davis, E. Philip, 1998. "Pension Funds: Retirement-Income Security and Capital Markets: An International Perspective," OUP Catalogue, Oxford University Press, number 9780198293040, September.
    10. Andrew A. Samwick & Jonathan Skinner, 1998. "How Will Defined Contribution Pension Plans Affect Retirement Income?," NBER Working Papers 6645, National Bureau of Economic Research, Inc.
    11. Amy Finkelstein & James Poterba, 1999. "Selection Effects in the Market for Individual Annuities: New Evidence from the United Kingdom," NBER Working Papers 7168, National Bureau of Economic Research, Inc.
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