IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/20209.html
   My bibliography  Save this paper

On annuities: an overview of the issues

Author

Listed:
  • 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.

Suggested Citation

  • Ferro, Gustavo, 2008. "On annuities: an overview of the issues," MPRA Paper 20209, University Library of Munich, Germany, revised Oct 2009.
    • Handle: RePEc:pra:mprapa:20209
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/20209/1/MPRA_paper_20209.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. 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, vol. 73(4), pages 647-672, December.
    2. David McCarthy & Olivia S. Mitchell, 2004. "Annuities for an ageing world," Chapters, in: Elsa Fornero & Elisa Luciano (ed.), Developing an Annuity Market in Europe, chapter 2, pages 13-48, Edward Elgar Publishing.
    3. Thomas Davidoff & Jeffrey R. Brown & Peter A. Diamond, 2005. "Annuities and Individual Welfare," American Economic Review, American Economic Association, vol. 95(5), pages 1573-1590, December.
    4. N. A. Barr, 2002. "The Pension Puzzle; Prerequisites and Policy Choices in Pension Design," IMF Economic Issues 29, International Monetary Fund.
    5. 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, vol. 7(1), pages 95-119, March.
    6. Thorburn, Craig & Rocha, Roberto & Morales, Marco, 2007. "An analysis of money's worth ratios in Chile," Journal of Pension Economics and Finance, Cambridge University Press, vol. 6(3), pages 287-312, November.
    7. 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.
    8. 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).
    9. 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 wp063, University of Michigan, Michigan Retirement Research Center.
    10. Mr. Alain Jousten, 2007. "Public Pension Reform: A Primer," IMF Working Papers 2007/028, International Monetary Fund.
    11. Wolfram Horneff & Raimond Maurer & Olivia Mitchell & Ivica Dus, 2006. "Optimizing the Retirement Portfolio: Asset Allocation, Annuitization, and Risk Aversion," Working Papers wp124, University of Michigan, Michigan Retirement Research Center.
    12. Fiona Stewart, 2007. "Policy Issues for Developing Annuities Markets," OECD Working Papers on Insurance and Private Pensions 2, OECD Publishing.
    13. Mr. Tim Callen & Warwick J. McKibbin & Nicoletta Batini, 2006. "The Global Impact of Demographic Change," IMF Working Papers 2006/009, International Monetary Fund.
    14. Pablo Antolin, 2007. "Longevity Risk and Private Pensions," Financial Market Trends, OECD Publishing, vol. 2007(1), pages 107-128.
    15. Edward Whitehouse, 2007. "Life-Expectancy Risk and Pensions: Who Bears the Burden?," OECD Social, Employment and Migration Working Papers 60, OECD Publishing.
    16. 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.
    17. Mr. George A Mackenzie, 2002. "The Role of Private Sector Annuities Markets in an Individual Accounts Reform of a Public Pension Plan," IMF Working Papers 2002/161, International Monetary Fund.
    18. Cannon, Edmund & Tonks, Ian, 2008. "Annuity Markets," OUP Catalogue, Oxford University Press, number 9780199216994.
    19. Mr. N. A. Barr, 2002. "The Pension Puzzle: Prerequisites and Policy Choices in Pension Design," IMF Economic Issues 2002/002, International Monetary Fund.
    20. James M. Poterba, 2001. "Annuity markets and retirement security," Fiscal Studies, Institute for Fiscal Studies, vol. 22(3), pages 249-270., September.
    21. Olivia S Mitchell & John Piggott & Michael Sherris & Shaun Yow, 2006. "Financial Innovation for an Ageing World," RBA Annual Conference Volume (Discontinued), in: Christopher Kent & Anna Park & Daniel Rees (ed.),Demography and Financial Markets, Reserve Bank of Australia.
    22. 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).
    23. 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.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. 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.
    2. Bravo, Jorge Miguel & El Mekkaoui de Freitas, Najat, 2018. "Valuation of longevity-linked life annuities," Insurance: Mathematics and Economics, Elsevier, vol. 78(C), pages 212-229.
    3. Sanders, Lisanne & Melenberg, Bertrand, 2016. "Estimating the joint survival probabilities of married individuals," Insurance: Mathematics and Economics, Elsevier, vol. 67(C), pages 88-106.
    4. Marco Morales & Guillermo Larraín, 2017. "The Chilean Electronic Market for Annuities (SCOMP): Reducing Information Asymmetries and Improving Competition," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 42(3), pages 389-405, July.
    5. Hui Li & Seth Neumuller & Casey Rothschild, 2021. "Optimal annuitization with imperfect information about insolvency risk," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 88(1), pages 101-130, March.
    6. Carlos Vidal-Melia & Ana Lejárraga-García, 2004. "The Bequest Motive And Single People’S Demand For Life Annuities," Public Economics 0405005, University Library of Munich, Germany.
    7. Wolfram Horneff & Raimond Maurer & Olivia Mitchell & Michael Stamos, 2007. "Money in Motion: Dynamic Portfolio Choice in Retirement," Working Papers wp152, University of Michigan, Michigan Retirement Research Center.
    8. Pang, Gaobo & Warshawsky, Mark, 2010. "Optimizing the equity-bond-annuity portfolio in retirement: The impact of uncertain health expenses," Insurance: Mathematics and Economics, Elsevier, vol. 46(1), pages 198-209, February.
    9. Robert Holzmann & Richard Hinz, 2005. "Old Age Income Support in the 21st century: An International Perspective on Pension Systems and Reform," World Bank Publications - Books, The World Bank Group, number 7336, December.
    10. Jaime Casassus & Eduardo Walker, 2013. "Adjusted Money's Worth Ratios in Life Annuities," Documentos de Trabajo 434, Instituto de Economia. Pontificia Universidad Católica de Chile..
    11. Sutcliffe, Charles, 2015. "Trading death: The implications of annuity replication for the annuity puzzle, arbitrage, speculation and portfolios," International Review of Financial Analysis, Elsevier, vol. 38(C), pages 163-174.
    12. Oded Palmon & Avia Spivak, 2007. "Adverse selection and the market for annuities," The Geneva Papers on Risk and Insurance Theory, Springer;International Association for the Study of Insurance Economics (The Geneva Association), vol. 32(1), pages 37-59, June.
    13. Butler, Monika & Teppa, Federica, 2005. "Should You Take a Lump-Sum or Annuitize? Results from Swiss Pension Funds," CEPR Discussion Papers 5316, C.E.P.R. Discussion Papers.
    14. Peijnenburg, J.M.J. & Nijman, T.E. & Werker, B.J.M., 2010. "Optimal Annuitization with Incomplete Annuity Markets and Background Risk During Retirement," Other publications TiSEM 0b8e2130-a64a-48c1-97d6-8, Tilburg University, School of Economics and Management.
    15. David Blake & Marco Morales & Enrico Biffis & Yijia Lin & Andreas Milidonis, 2017. "Special Edition: Longevity 10 – The Tenth International Longevity Risk and Capital Markets Solutions Conference," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 84(S1), pages 515-532, April.
    16. Francisco Gomes & Michael Haliassos & Tarun Ramadorai, 2021. "Household Finance," Journal of Economic Literature, American Economic Association, vol. 59(3), pages 919-1000, September.
    17. Whelan, Shane, 2007. "Valuing Ireland's Pension System," Quarterly Economic Commentary: Special Articles, Economic and Social Research Institute (ESRI), vol. 2007(2-Summer), pages 55-80.
    18. Sanders, Lisanne & De Waegenaere, Anja & Nijman, Theo E., 2013. "When can insurers offer products that dominate delayed old-age pension benefit claiming?," Insurance: Mathematics and Economics, Elsevier, vol. 53(1), pages 134-149.
    19. Thorburn, Craig & Rocha, Roberto & Morales, Marco, 2007. "An analysis of money's worth ratios in Chile," Journal of Pension Economics and Finance, Cambridge University Press, vol. 6(3), pages 287-312, November.
    20. Sanders, E.A.T. & De Waegenaere, A.M.B. & Nijman, T.E., 2010. "When Can Insurers Offer Products That Dominate Delayed Old-Age Pension Benefit Claiming?," Other publications TiSEM ea3f9bbb-92ce-4dfe-a1fe-e, Tilburg University, School of Economics and Management.

    More about this item

    Keywords

    annuity; insurance; pension;
    All these keywords.

    JEL classification:

    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:20209. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.