Risks in pensions and annuities : efficient designs
AbstractThis paper considers alternatives to disperse the accumulated pension rights during the liquidation phase or retirement. First, the paper classifies the risks that affect pensioners, discusses the defined benefit and defined contribution options, and classifies pension contracts according to thetype of risk they transfer to worker. It considers fixed annuities, variable annuities, CREF annuities, and programmed withdrawal. This part is a description of the production function for pensions and annuities. Second, the paper offers a discussion of the restrictions that should be imposed by mandatory pension systems on the menu of pension contracts. One section discusses whether lump sum withdrawals should be allowed and the other discusses if there should be a mandate to annuitize wealth. The argument that the annuitization should be mandated to prevent adverse selection is rejected on the basis of Chilean evidence.
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Bibliographic InfoPaper provided by The World Bank in its series Social Protection Discussion Papers with number 20847.
Date of creation: 28 Feb 1998
Date of revision:
Insurance&Risk Mitigation; Banks&Banking Reform; Environmental Economics&Policies; Pensions&Retirement Systems; Financial Intermediation;
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- Diamond, Peter, 2002. "Public Finance Theory - Then and Now," Journal of Public Economics, Elsevier, vol. 86(3), pages 311-317, December.
- Vittas, Dimitri, 2011. "The mechanics and regulation of variable payout annuities," Policy Research Working Paper Series 5762, The World Bank.
- James, Estelle & Vittas, Dimitri, 2000. "Annuity markets in comparative perspective : do consumers get their money's wotrth?," Policy Research Working Paper Series 2493, The World Bank.
- Estelle James & Guillermo Martinez & Augusto Iglesias, 2005. "The Payout Stage in Chile: Who Annuitizes and Why?," Working Papers 14, Superintendencia de Pensiones, revised May 2007.
- Alier, Max & Vittas, Dimitri, 2000. "Personal pension plans and stock market volatility," Policy Research Working Paper Series 2463, The World Bank.
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