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Can the Private Annuity Market Provide Secure Retirement Income?

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  • Miss Allison C Schrager
  • Mr. George A Mackenzie

Abstract

Annuity premiums are often assumed to be constant, although they can be expected to vary with the yield curve. Variations in premiums will become an important public policy issue as defined-contribution (DC) pension plans play an increasingly prominent role in providing retirement income. As DC plan holders retire, many will annuitize at least a part of their account balances. In the absence of current data on annuity prices, the paper relies on U.S. Treasury interest rate data to simulate the impact of interest rate variation on annuity premiums. For a spectrum of feasible interest rates, the variation in retirement income is not negligible.

Suggested Citation

  • Miss Allison C Schrager & Mr. George A Mackenzie, 2004. "Can the Private Annuity Market Provide Secure Retirement Income?," IMF Working Papers 2004/230, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2004/230
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    References listed on IDEAS

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    7. Amy Finkelstein & James Poterba, 2004. "Adverse Selection in Insurance Markets: Policyholder Evidence from the U.K. Annuity Market," Journal of Political Economy, University of Chicago Press, vol. 112(1), pages 183-208, February.
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    Cited by:

    1. Angelo Marano & Carlo Mazzaferro & Marcello Morciano, 2012. "The strengths and failures of incentive mechanisms in notional defined contribution pension systems," Giornale degli Economisti, GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, vol. 71(1), pages 33-70, October.
    2. Ferro, Gustavo, 2008. "Un impulso al mercado de rentas vitalicias en España [Promoting the annuities market in Spain]," MPRA Paper 20211, University Library of Munich, Germany, revised Jul 2008.
    3. Ferro, Gustavo, 2008. "On annuities: an overview of the issues," MPRA Paper 20209, University Library of Munich, Germany, revised Oct 2009.

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