Download Annuity Markets by Edmund Cannon, Ian Tonks PDF

By Edmund Cannon, Ian Tonks

The Pension trouble matters the altering demographic profile of extra aged and less teenagers within the economic system. figuring out and tackling this approaching difficulty is a key job for public coverage. An annuity protects someone from outliving their discount rates, and is principal to pensions coverage. This publication examines the differing kinds of annuities on hand, how those annuities are priced, the historical past of annuities, how annuities markets functionality: how they paintings, and are they effective. It offers a global comparability of annuity markets, and examines fresh advancements in annuity markets.

Governments around the globe are moving their pension regulations clear of pay-as-you-go structures in the direction of person rate reductions schemes. those discounts must be switched over right into a pension at retirement, and annuity markets supply this functionality. This publication is a entire research of annuity markets. The ebook begins via outlining the context of public coverage in the direction of pensions coverage. It then explains the differing kinds of annuities to be had, targeting the united states and united kingdom, and the way those annuities are priced, reading pricing and booking tools from an actuarial point of view and in addition describing mortality dimension. the subsequent chapters describe the background of annuities, and the event of annuity markets in nations except the united kingdom and US. The ebook then outlines the speculation at the back of annuites, and explains how annuities insure shoppers opposed to durability hazards. the following bankruptcy describes how annuities markets functionality: how they paintings, and whether or not they are effective, prime onto a dialogue of the annuity puzzle. The booklet concludes by way of discussing fresh advancements in annuity markets.

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While annuity products continue to be an important component of a number of pensions systems, there are a number of public policy questions relating to both the supply and the demand side of annuities. Notes 1. More recently, the World Bank has suggested two more pillars: a basic income and minimum health care (Holzmann and Hinz 2005). 2. Palacios and Pallares-Miralles (2000) identify these countries and Australia, South Africa, Switzerland, and Iceland as being countries with significant private pension fund assets.

Relationship between annuity rate and purchase price for small purchase prices Source: FSA and authors’ own calculations. 5. Evidence on non-linear pricing: CPA rates, men, 65, December 2007. Relationship between annuity rate and purchase price for large purchase prices Source: FSA and authors’ own calculation. 14 For larger purchases the situation is quite different. Annuity rates appear independent of purchase price for most companies but Legal & General and Prudential offer much lower rates for larger purchases, suggesting a dislike for richer individuals who may be higher risk.

24 Description of annuity markets Our discussion of the simple annuity theory in Chapter 7 is based on the maximization of an individual’s utility. In the context of a household, it is more appropriate to consider maximization of household utility, which depends upon the utility of both partners. A joint-life annuity would smooth retirement income and consumption more effectively for the whole household and in the absence of other considerations would often be superior to a single-life annuity.

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