Annuity Markets in Comparative Perspective : Do Consumers Get Their Money's Worth?
Pension reforms normally focus on the accumulation phase, plus term insurance that provides bnefits for the disabled and for dependent survivors, all of which are immediate concerns. Decumulation of the capital in workers' retirement savings a...
| Main Authors: | , |
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2014
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2000/11/717423/annuity-markets-comparative-perspective-consumers-moneys-wotrth http://hdl.handle.net/10986/19775 |
| id |
okr-10986-19775 |
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| recordtype |
oai_dc |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English en_US |
| topic |
ACTUARIES ADVERSE SELECTION ANNUITIES ANNUITY ANNUITY MARKETS ANNUITY OPTION ANNUITY PROVIDERS ASYMMETRIC INFORMATION BENEFICIARIES BOND RATE CAPITAL MARKETS COMMISSIONS CONSUMERS CROWDING DISCOUNT RATES ECONOMISTS ELASTICITIES ELASTICITY OF DEMAND EMPIRICAL EVIDENCE FINANCIAL INSTRUMENTS FINANCIAL MARKETS FUTURE MORTALITY IMPROVEMENTS GOVERNMENT REGULATIONS GRADUAL WITHDRAWALS GUARANTEED PERIOD HEALTH STATUS IMPROVEMENTS IN HEALTH INCOME DISTRIBUTION INDEXED ANNUITY INDEXED BONDS INFLATION INFLATION RISK INSURANCE INSURANCE COMPANIES INSURANCE COMPANY INSURANCE COMPANY INVESTMENTS INSURANCE INDUSTRY INSURANCE PRODUCTS INSURANCE PROVIDERS INSURANCE RISK INTEREST RATES INVESTMENT DIVERSIFICATION INVESTMENT INSURANCE INVESTMENT RETURNS JOINT ANNUITY LIFE ANNUITIES LIFE EXPECTANCIES LIFE EXPECTANCY LIFE INSURANCE LIFE INSURANCE COMPANIES LONGEVITY INSURANCE MANDATORY RETIREMENT MANDATORY SYSTEM MORTALITY MORTALITY TABLES MULTI-PILLAR SYSTEM MULTI-PILLAR SYSTEMS OCCUPATIONAL PENSIONS PENSION FUND PENSION FUNDS PENSION REFORMS PENSION SYSTEM PENSIONERS PERSONAL PENSIONS POLICY RESEARCH PORTFOLIO RETURN PREMIUMS PRESENT VALUE PRICE CHANGES PRIVATE INSURANCE PRIVATE INSURANCE COMPANIES PRIVATE SECTOR REGULATION OF INSURANCE REINVESTMENT RISK REPLACEMENT RATE RESERVES RETIREES RETIREMENT INCOME RETIREMENT SAVINGS RISK AVERSION RISK INTERMEDIATION RISK PREMIUM RISK-FREE RATE RISKY RATE SAVINGS SOCIAL SECURITY STOCKHOLDERS |
| spellingShingle |
ACTUARIES ADVERSE SELECTION ANNUITIES ANNUITY ANNUITY MARKETS ANNUITY OPTION ANNUITY PROVIDERS ASYMMETRIC INFORMATION BENEFICIARIES BOND RATE CAPITAL MARKETS COMMISSIONS CONSUMERS CROWDING DISCOUNT RATES ECONOMISTS ELASTICITIES ELASTICITY OF DEMAND EMPIRICAL EVIDENCE FINANCIAL INSTRUMENTS FINANCIAL MARKETS FUTURE MORTALITY IMPROVEMENTS GOVERNMENT REGULATIONS GRADUAL WITHDRAWALS GUARANTEED PERIOD HEALTH STATUS IMPROVEMENTS IN HEALTH INCOME DISTRIBUTION INDEXED ANNUITY INDEXED BONDS INFLATION INFLATION RISK INSURANCE INSURANCE COMPANIES INSURANCE COMPANY INSURANCE COMPANY INVESTMENTS INSURANCE INDUSTRY INSURANCE PRODUCTS INSURANCE PROVIDERS INSURANCE RISK INTEREST RATES INVESTMENT DIVERSIFICATION INVESTMENT INSURANCE INVESTMENT RETURNS JOINT ANNUITY LIFE ANNUITIES LIFE EXPECTANCIES LIFE EXPECTANCY LIFE INSURANCE LIFE INSURANCE COMPANIES LONGEVITY INSURANCE MANDATORY RETIREMENT MANDATORY SYSTEM MORTALITY MORTALITY TABLES MULTI-PILLAR SYSTEM MULTI-PILLAR SYSTEMS OCCUPATIONAL PENSIONS PENSION FUND PENSION FUNDS PENSION REFORMS PENSION SYSTEM PENSIONERS PERSONAL PENSIONS POLICY RESEARCH PORTFOLIO RETURN PREMIUMS PRESENT VALUE PRICE CHANGES PRIVATE INSURANCE PRIVATE INSURANCE COMPANIES PRIVATE SECTOR REGULATION OF INSURANCE REINVESTMENT RISK REPLACEMENT RATE RESERVES RETIREES RETIREMENT INCOME RETIREMENT SAVINGS RISK AVERSION RISK INTERMEDIATION RISK PREMIUM RISK-FREE RATE RISKY RATE SAVINGS SOCIAL SECURITY STOCKHOLDERS James, Estelle Vittas, Dimitri Annuity Markets in Comparative Perspective : Do Consumers Get Their Money's Worth? |
| geographic_facet |
East Asia and Pacific Europe and Central Asia Latin America & Caribbean North America Australia Chile Israel Singapore Switzerland United Kingdom |
| relation |
Policy Research Working Paper;No. 2493 |
| description |
Pension reforms normally focus on the
accumulation phase, plus term insurance that provides
bnefits for the disabled and for dependent survivors, all of
which are immediate concerns. Decumulation of the capital in
workers' retirement savings accounts appears to be far
in the future. But in the second generation of reforms,
countries have begun paying attention to eventual
decumulation--either through gradual withdrawals or through
annuitization, which provides longevity insurance. At this
point, it becomes important to learn whether annuity markets
exist and how they operate. The authors summarize
preliminary results of a continuing research project that
analyzes annuity markets in Australia, Canada, Chile,
Israel, Singapore, Switzerland, and the United Kingdom. They
focus on understanding whether annuity markets can be relied
upon to provide reliable retirement income at reasonable
prices. One way to approach this question is to explore
whether the expected payouts and the
"money's-worth ratio" differ across
countries, and if so, why, and what light can be thrown on
the existence and amount of adverse selection. Annuity
markets are poorly designed for various reasons: worker
myopia, precautionary and bequest saving (not erved by most
annuity products), distrust of insurance companies (and
unwillingness to turn sizeable savings over to them),
adverse selection, and the crowding-out effect of social
security (Which automatically annuitizes the largest share
of people's retirement wealth). Preliminary findings
suggest that the cost of annuities is lower than might be
expected. When the risk-free discount rate is used, the
money's-worth ratios of nominal annuities based on
annuitant mortality tables exceed 90 percent--neither the
industry "take" nor the effects of adverse
selection appear to be as large as anticipated. But real
annuities (in Chile, Israel, and the United Kingdom) have
money's-worth ratios 7 to 9 percent lower than those of
nominal annuities. And when the "riskier"
corporate bond rate is used for discounting purposes, there
is a further 7 percent reduction. The main policy issues
include public versus private provision, the role of
insurance companies in term and risk intermediation, the
level of compulsory annuitization, and the need for robust
regulation of annuity providers. |
| format |
Publications & Research :: Policy Research Working Paper |
| author |
James, Estelle Vittas, Dimitri |
| author_facet |
James, Estelle Vittas, Dimitri |
| author_sort |
James, Estelle |
| title |
Annuity Markets in Comparative Perspective : Do Consumers Get Their Money's Worth? |
| title_short |
Annuity Markets in Comparative Perspective : Do Consumers Get Their Money's Worth? |
| title_full |
Annuity Markets in Comparative Perspective : Do Consumers Get Their Money's Worth? |
| title_fullStr |
Annuity Markets in Comparative Perspective : Do Consumers Get Their Money's Worth? |
| title_full_unstemmed |
Annuity Markets in Comparative Perspective : Do Consumers Get Their Money's Worth? |
| title_sort |
annuity markets in comparative perspective : do consumers get their money's worth? |
| publisher |
World Bank, Washington, DC |
| publishDate |
2014 |
| url |
http://documents.worldbank.org/curated/en/2000/11/717423/annuity-markets-comparative-perspective-consumers-moneys-wotrth http://hdl.handle.net/10986/19775 |
| _version_ |
1764440614847381504 |
| spelling |
okr-10986-197752021-04-23T14:03:44Z Annuity Markets in Comparative Perspective : Do Consumers Get Their Money's Worth? James, Estelle Vittas, Dimitri ACTUARIES ADVERSE SELECTION ANNUITIES ANNUITY ANNUITY MARKETS ANNUITY OPTION ANNUITY PROVIDERS ASYMMETRIC INFORMATION BENEFICIARIES BOND RATE CAPITAL MARKETS COMMISSIONS CONSUMERS CROWDING DISCOUNT RATES ECONOMISTS ELASTICITIES ELASTICITY OF DEMAND EMPIRICAL EVIDENCE FINANCIAL INSTRUMENTS FINANCIAL MARKETS FUTURE MORTALITY IMPROVEMENTS GOVERNMENT REGULATIONS GRADUAL WITHDRAWALS GUARANTEED PERIOD HEALTH STATUS IMPROVEMENTS IN HEALTH INCOME DISTRIBUTION INDEXED ANNUITY INDEXED BONDS INFLATION INFLATION RISK INSURANCE INSURANCE COMPANIES INSURANCE COMPANY INSURANCE COMPANY INVESTMENTS INSURANCE INDUSTRY INSURANCE PRODUCTS INSURANCE PROVIDERS INSURANCE RISK INTEREST RATES INVESTMENT DIVERSIFICATION INVESTMENT INSURANCE INVESTMENT RETURNS JOINT ANNUITY LIFE ANNUITIES LIFE EXPECTANCIES LIFE EXPECTANCY LIFE INSURANCE LIFE INSURANCE COMPANIES LONGEVITY INSURANCE MANDATORY RETIREMENT MANDATORY SYSTEM MORTALITY MORTALITY TABLES MULTI-PILLAR SYSTEM MULTI-PILLAR SYSTEMS OCCUPATIONAL PENSIONS PENSION FUND PENSION FUNDS PENSION REFORMS PENSION SYSTEM PENSIONERS PERSONAL PENSIONS POLICY RESEARCH PORTFOLIO RETURN PREMIUMS PRESENT VALUE PRICE CHANGES PRIVATE INSURANCE PRIVATE INSURANCE COMPANIES PRIVATE SECTOR REGULATION OF INSURANCE REINVESTMENT RISK REPLACEMENT RATE RESERVES RETIREES RETIREMENT INCOME RETIREMENT SAVINGS RISK AVERSION RISK INTERMEDIATION RISK PREMIUM RISK-FREE RATE RISKY RATE SAVINGS SOCIAL SECURITY STOCKHOLDERS Pension reforms normally focus on the accumulation phase, plus term insurance that provides bnefits for the disabled and for dependent survivors, all of which are immediate concerns. Decumulation of the capital in workers' retirement savings accounts appears to be far in the future. But in the second generation of reforms, countries have begun paying attention to eventual decumulation--either through gradual withdrawals or through annuitization, which provides longevity insurance. At this point, it becomes important to learn whether annuity markets exist and how they operate. The authors summarize preliminary results of a continuing research project that analyzes annuity markets in Australia, Canada, Chile, Israel, Singapore, Switzerland, and the United Kingdom. They focus on understanding whether annuity markets can be relied upon to provide reliable retirement income at reasonable prices. One way to approach this question is to explore whether the expected payouts and the "money's-worth ratio" differ across countries, and if so, why, and what light can be thrown on the existence and amount of adverse selection. Annuity markets are poorly designed for various reasons: worker myopia, precautionary and bequest saving (not erved by most annuity products), distrust of insurance companies (and unwillingness to turn sizeable savings over to them), adverse selection, and the crowding-out effect of social security (Which automatically annuitizes the largest share of people's retirement wealth). Preliminary findings suggest that the cost of annuities is lower than might be expected. When the risk-free discount rate is used, the money's-worth ratios of nominal annuities based on annuitant mortality tables exceed 90 percent--neither the industry "take" nor the effects of adverse selection appear to be as large as anticipated. But real annuities (in Chile, Israel, and the United Kingdom) have money's-worth ratios 7 to 9 percent lower than those of nominal annuities. And when the "riskier" corporate bond rate is used for discounting purposes, there is a further 7 percent reduction. The main policy issues include public versus private provision, the role of insurance companies in term and risk intermediation, the level of compulsory annuitization, and the need for robust regulation of annuity providers. 2014-08-27T18:49:55Z 2014-08-27T18:49:55Z 2000-11 http://documents.worldbank.org/curated/en/2000/11/717423/annuity-markets-comparative-perspective-consumers-moneys-wotrth http://hdl.handle.net/10986/19775 English en_US Policy Research Working Paper;No. 2493 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research East Asia and Pacific Europe and Central Asia Latin America & Caribbean North America Australia Chile Israel Singapore Switzerland United Kingdom |