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On annuities: an overview of the issues

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  • Ferro, Gustavo

Abstract

Longevity is increasing in the whole world, and savings for retirement are growing quickly. There is a potential demand for certainty in the income streams for pensioners since old-fashioned pay-as-you-go systems became financially stressed. A financial product, the annuity contract, offers longevity insurance but its market is not well developed, even in the small set of countries where it exists. The instrument, its market and its problems are analyzed, and a discussion is made in order to ameliorate the understanding of an apparent paradox: why an interesting instrument is not more demanded and supplied.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 20209.

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Date of creation: Jul 2008
Date of revision: Oct 2009
Handle: RePEc:pra:mprapa:20209

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Keywords: annuity; insurance; pension;

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References

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  1. Alain Jousten, 2007. "Public Pension Reform: A Primer," IMF Working Papers 07/28, International Monetary Fund.
  2. Cannon, Edmund & Tonks, Ian, 2008. "Annuity Markets," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780199216994, October.
  3. David Blake & Andrew Cairns & Kevin Dowd & Richard MacMinn, 2006. "Longevity Bonds: Financial Engineering, Valuation, and Hedging," Journal of Risk & Insurance, The American Risk and Insurance Association, The American Risk and Insurance Association, vol. 73(4), pages 647-672.
  4. Pablo Antolin, 2007. "Longevity Risk and Private Pensions," Financial Market Trends, OECD Publishing, OECD Publishing, vol. 2007(1), pages 107-128.
  5. Thorburn, Craig & Rocha, Roberto & Morales, Marco, 2006. "An analysis of money's worth ratios in Chile," Policy Research Working Paper Series 3926, The World Bank.
  6. Jeffrey R. Brown & James M. Poterba, 2004. "Household Demand for Variable Annuities," Working Papers, Center for Retirement Research at Boston College wp2004-8, Center for Retirement Research, revised Mar 2004.
  7. Wolfram Horneff & Raimond Maurer & Olivia Mitchell & Ivica Dus, 2006. "Optimizing the Retirement Portfolio: Asset Allocation, Annuitization, and Risk Aversion," Working Papers, University of Michigan, Michigan Retirement Research Center wp124, University of Michigan, Michigan Retirement Research Center.
  8. Fiona Stewart, 2007. "Policy Issues for Developing Annuities Markets," OECD Working Papers on Insurance and Private Pensions 2, OECD Publishing.
  9. Rocha, Roberto & Morales, Marco & Thorburn, Craig, 2008. "An empirical analysis of the annuity rate in Chile," Journal of Pension Economics and Finance, Cambridge University Press, Cambridge University Press, vol. 7(01), pages 95-119, March.
  10. Thomas Davidoff & Jeffrey R. Brown & Peter A. Diamond, 2005. "Annuities and Individual Welfare," American Economic Review, American Economic Association, American Economic Association, vol. 95(5), pages 1573-1590, December.
  11. E. Philip Davis, 2002. "Issues in the Regulation of Annuities Markets," CeRP Working Papers 26, Center for Research on Pensions and Welfare Policies, Turin (Italy).
  12. James M. Poterba, 2001. "Annuity markets and retirement security," Fiscal Studies, Institute for Fiscal Studies, Institute for Fiscal Studies, vol. 22(3), pages 249-270., September.
  13. Estelle James & Xue Song, 2001. "Annuities Markets Around the World: Money’s Worth and Risk Intermediation," CeRP Working Papers 16, Center for Research on Pensions and Welfare Policies, Turin (Italy).
  14. G. A. Mackenzie, 2002. "The Role of Private Sector Annuities Markets in an Individual Accounts Reform of a Public Pension Plan," IMF Working Papers 02/161, International Monetary Fund.
  15. Allison Schrager & G. A. Mackenzie, 2004. "Can the Private Annuity Market Provide Secure Retirement Income?," IMF Working Papers 04/230, International Monetary Fund.
  16. Edward R. Whitehouse, 2007. "Life-Expectancy Risk and Pensions: Who Bears the Burden?," OECD Social, Employment and Migration Working Papers 60, OECD Publishing.
  17. Irena Dushi & Anthony Webb, 2004. "Annuitization: Keeping Your Options Open," Working Papers, Center for Retirement Research at Boston College wp2004-4, Center for Retirement Research, revised Mar 2004.
  18. Tim Callen & Warwick J. McKibbin & Nicoletta Batini, 2006. "The Global Impact of Demographic Change," IMF Working Papers 06/9, International Monetary Fund.
  19. Olivia S. Mitchell & John Piggott & Michael Sherris & Shaun Yow, 2006. "Financial Innovation for an Aging World," NBER Working Papers 12444, National Bureau of Economic Research, Inc.
  20. Ivica Dus & Raimond Maurer & Olivia S. Mitchell, 2003. "Betting on Death and Capital Markets in Retirement: A Shortfall Risk Analysis of Life Annuities versus Phased Withdrawal Plans," Working Papers, University of Michigan, Michigan Retirement Research Center wp063, University of Michigan, Michigan Retirement Research Center.
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