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Journal articles on the topic 'Annuities'

Author: Grafiati

Published: 4 June 2021

Last updated: 30 July 2024

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1

DUSHI, IRENA, and ANTHONY WEBB. "Household annuitization decisions: simulations and empirical analyses." Journal of Pension Economics and Finance 3, no. 2 (July 2004): 109–43. http://dx.doi.org/10.1017/s1474747204001696.

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Annuities provide insurance against outliving one's wealth. Previous studies have indicated that, for many households, the value of the longevity insurance should outweigh the actuarial unfairness of prices in the voluntary annuity market. Nonetheless, voluntary annuitization rates are extremely low.Previous research on the value of annuitization has compared an optimal decumulation of unannuitized wealth with the alternative of annuitizing all unannuitized wealth at age 65. We relax these assumptions, allowing households to annuitize any part of their unannuitized wealth at any age and to return to the annuity market as many times as they wish.Using numerical optimization techniques, assuming the levels of actuarial unfairness of annuities calculated in previous research, and retaining the assumption made in previous research that one half of household wealth is pre-annuitized, we conclude that it is optimal for couples to delay annuitization until they are aged 73–82, and in some cases never to annuitize. It is usually optimal for single men and women to annuitize at substantially younger ages, between 65 and 70. Households that annuitize will generally wish to annuitize only part of their unannuitized wealth.Using data from the Asset and Health Dynamics Among the Oldest Old and Health and Retirement Study panels, we show that much of the failure of the average currently retired household to annuitize can be attributed to the exceptionally high proportions of the wealth of these cohorts that is pre-annuitized. We expect younger cohorts to have smaller proportions of pre-annuitized wealth and project increasing demand for annuitization as successive cohorts age.

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2

Kling, Alexander, Andreas Richter, and Jochen Ruß. "ANNUITIZATION BEHAVIOR: TAX INCENTIVES VS. PRODUCT DESIGN." ASTIN Bulletin 44, no. 3 (July 17, 2014): 535–58. http://dx.doi.org/10.1017/asb.2014.17.

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AbstractWe analyze and compare the impact of tax incentives and of introducing enhanced annuities on annuitization behavior considering heterogeneity among the insured. We find that tax incentives for annuitization result in a significant increase of the portion of people who should annuitize and also an increase of the insurer's profit since less healthy individuals also annuitize, i.e. adverse selection is reduced. However, the problem that different insured receive a different value for money is even increased by tax incentives. If enhanced annuities are introduced, the percentage of insured who should annuitize further increases. Adverse selection is further reduced and the differences in value for money from annuitizing shrink.

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3

JAMES, ESTELLE, GUILLERMO MARTINEZ, and AUGUSTO IGLESIAS. "The payout stage in Chile: who annuitizes and why?" Journal of Pension Economics and Finance 5, no. 2 (May 11, 2006): 121–54. http://dx.doi.org/10.1017/s1474747205002404.

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In 1981 Chile adopted its new multi-pillar system, which featured privately managed individual accounts. Starting in 1983 payouts from the accounts were permitted and detailed rules about payouts were put in place. The Chilean scheme therefore gives us an opportunity to examine how pensioners and pension providers react when individual accounts replace DB systems, and how detailed regulations shape these reactions.Retirees in Chile have a choice between early versus normal retirement (before or after age 65M/60W) and between annuitization versus programmed withdrawals; lump sum withdrawals are largely ruled out. Almost two-thirds of all retirees have annuitized – a very high proportion compared with other countries. This paper argues that this high rate of annuitization is the result of guarantees and regulations that constrain payout choices, insure retirees through the minimum pension guarantee, eliminate other DB components, and give a competitive advantage to insurance companies selling annuities. The minimum pension financed by the government provides insurance to workers with small accumulations, who retire at the normal age with programmed withdrawals, while those with large accumulations retire early and must purchase annuities to acquire longevity and investment insurance. Insurance companies further induce annuitization by marketing aggressively, facilitating early retirement for those who annuitize and offering a high money's worth ratio for price-indexed annuities. We find evidence of adverse selection based on asymmetric information about short-run health status, but this does not seem to deter the high rate of annuitization.

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4

Cannon, Edmund, Ian Tonks, and Rob Yuille. "The effect of the reforms to compulsion on annuity demand." National Institute Economic Review 237 (August 2016): R47—R54. http://dx.doi.org/10.1177/002795011623700116.

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This paper investigates the effect of recent regulatory changes to the compulsory annuitisation of tax-privileged pension savings, on the demand for annuities and other retirement products. We find that the demand for annuities has fallen by almost 75 per cent from its peak in 2012, and the demand for income drawdown products has increased. There is some evidence that people at younger ages and with smaller pension pots are choosing not to annuitise, and hence the average size of an annuity purchase has increased.

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5

Reichling, Felix, and Kent Smetters. "Optimal Annuitization with Stochastic Mortality and Correlated Medical Costs." American Economic Review 105, no. 11 (November 1, 2015): 3273–320. http://dx.doi.org/10.1257/aer.20131584.

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The conventional wisdom since Yaari (1965) is that households without a bequest motive should fully annuitize their investments. Numerous frictions do not break this sharp result. We modify the Yaari framework by allowing a household's mortality risk itself to be stochastic due to health shocks. A lifetime annuity still helps to hedge longevity risk. But the annuity's remaining present value is correlated with medical costs, such as those for nursing home care, thereby reducing annuity demand, even without ad-hoc liquidity constraints. We find that most households should not hold a positive level of annuities, and many should hold negative amounts. (JEL D14, D82, G23, I12, J14, J26)

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6

BROWN, JEFFREY, STEVEN HABERMAN, MOSHE MILEVSKY, and MIKE ORSZAG. "Overview of the Issue." Journal of Pension Economics and Finance 5, no. 2 (May 11, 2006): i—ii. http://dx.doi.org/10.1017/s1474747206002514.

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The second issue of the fifth volume of the JPEF features 4 research articles, and a book review section. The first article is by Estelle James, Guillermo Martinez and Augusto Iglesias and looks at: “The payout stage in Chile: Who annuitizes and why?” Low rates of voluntary annuitization are a major issue in defined contribution pension designs. Yet, in Chile, about 2/3 of individuals choose to annuitize instead of taking programmed withdrawals. The paper examines the reasons for this high rate of annuitization and concludes that it is due to the combination of a competitive market in annuities and the relatively constrained alternatives available to individuals. The paper nevertheless finds some evidence of adverse selection in the Chile annuity market.

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7

VIDAL-MELIÁ, CARLOS, and ANA LEJÁRRAGA-GARCÍA. "Demand for life annuities from married couples with a bequest motive." Journal of Pension Economics and Finance 5, no. 2 (May 11, 2006): 197–229. http://dx.doi.org/10.1017/s1474747205002349.

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The aim of this paper is to explain the ‘annuities puzzle’ in greater depth by introducing the bequest motive. It will try to determine whether this motive really is a relevant feature influencing the demand for life annuities from married couples. With this aim in mind, we develop an optimization model of the utility provided by purchasing a life annuity with contingent survivor benefit or a joint survivor life annuity. Our model is based on that first put forward by Brown and Poterba (2000), to which we have added elements from other models, such as Friedman and Warshawsky's (1990) and Vidal and Lejárraga's (2004), which include the bequest motive. This will enable us to calculate the annuity equivalent wealth and the optimal percentage of wealth to annuitize in various contexts: the possibility of access to actuarially fair annuity markets, the inclusion of so-called market imperfections, and the assumption that couples already have part of their wealth in pre-existing life annuities. Numerical results are presented for the case of Spain. The bequest motive is found not to be a significant factor influencing the demand for annuities from couples. Indeed very few couples would be willing to purchase them once we take into account the combined effects of market imperfections, the possibility of pre-existing annuities and the bequest motive. These findings have repercussions for policy makers regulating defined contribution capitalization systems, which are complementary to defined benefit systems.

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8

HORNEFF, WOLFRAM J., RAIMOND H. MAURER, OLIVIA S. MITCHELL, and MICHAEL Z. STAMOS. "Variable payout annuities and dynamic portfolio choice in retirement." Journal of Pension Economics and Finance 9, no. 2 (January 27, 2009): 163–83. http://dx.doi.org/10.1017/s1474747208003880.

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AbstractMany retirees hope to continue earning capital market rewards on their saving while avoiding outliving their funds during retirement. We model a dynamic utility maximizing investor who seeks to benefit from holding both equity and longevity insurance. She is free to adjust her portfolio allocation of her financial wealth as well as of the annuity over time, and she can purchase variable payout annuities any time and incrementally. In this setting, we show that the retiree will not fully annuitize even without bequests; rather, she will combine variable annuities with withdrawals from her liquid financial wealth so as to match her desired consumption profile. Optimal stock exposures decrease over time, both within the variable annuity and the withdrawal plan. Welfare gains from this strategy can amount to 40% of financial wealth, depending on risk parameters and other resources; additionally, many retirees will do almost as well as the fully optimized outcome if they hold variable annuities invested 60/40 in stocks/bonds.

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9

Weale, Martin, and Justin van de Ven. "Variable annuities and aggregate mortality risk." National Institute Economic Review 237 (August 2016): R55—R61. http://dx.doi.org/10.1177/002795011623700117.

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This paper explores the extent to which annuitants might be prepared to pay for protection against cohort-specific mortality risk, by comparing traditional indexed annuities with annuities whose payout rates are revised in response to differences between expected and actual mortality rates of the cohort in question. It finds that a man aged 65 with a coefficient of relative risk aversion of two would be prepared to pay 75p per £100 annuitised for protection against aggregate mortality risk while a man with risk aversion of twenty would be prepared to pay £5.75 per £100; studies put the actual cost at £2.70–£7 per £100, suggesting that unless annuitants are very risk averse it is likely that existing products tend to over-insure against cohort mortality risk.

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10

Rajaram, Rajeev, and Nathan Ritchey. "Polynomial Annuities." AppliedMath 2, no. 2 (May 5, 2022): 212–33. http://dx.doi.org/10.3390/appliedmath2020013.

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We use a payment pattern of the type {1k,2k,3k,…} to generalize the standard level payment and increasing annuity to polynomial payment patterns. We derive explicit formulas for the present value of an n-year polynomial annuity, the present value of an m-monthly n-year polynomial annuity, and the present value of an n-year continuous polynomial annuity. We also use the idea to extend the annuities to payment patterns derived from analytic functions, as well as to payment patterns of the type {1r,2r,3r,…}, with r being an arbitrary real number. In the process, we develop possible approximations to k! and for the gamma function evaluated at real numbers.

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11

Ledlie, M. C., D. P. Corry, G. S. Finkelstein, A. J. Ritchie, K. Su, and D. C. E. Wilson. "Variable Annuities." British Actuarial Journal 14, no. 2 (July 1, 2008): 327–89. http://dx.doi.org/10.1017/s1357321700001744.

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ABSTRACTThis paper provides a detailed overview of variable annuities. Consideration is given first to the definition of the term variable annuity. Common terminology used in the variable annuity market is introduced. The current state of the United Kingdom and other international markets is described. Then, by reference to a simplified product, an analysis of customer outcomes, pricing, reserving, risk management and hedging is carried out. The paper ends with a description of current U.K. pensions legislation and how it potentially constrains product development.

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12

Chen, Anran, Steven Haberman, and Stephen Thomas. "Cumulative prospect theory and deferred annuities." Review of Behavioral Finance 11, no. 3 (August 12, 2019): 277–93. http://dx.doi.org/10.1108/rbf-10-2017-0102.

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Purpose Although it has been proved theoretically that annuities can provide optimal consumption during one’s retirement period, retirees’ reluctance to purchase annuities is a long-standing puzzle. The purpose of this paper is to use behavioral model to analyze the low demand for immediate annuities. Design/methodology/approach The authors employ cumulative prospect theory (CPT), which contains both loss aversion and probability transformations, to analyze the annuity puzzle. Findings The authors show that CPT can explain the unattractiveness of immediate annuities. It also shows that retirees would be willing to buy a long-term deferred annuity at retirement. By considering each component from CPT in turn, the loss aversion is found to be the major reason that stops people from buying an annuity while the survival rate transformation is an important factor affecting the decision of when to receive annuity incomes. Originality/value This paper identifies CPT as one of the reasons for the low demand of immediate annuities. It further suggests that long-term deferred annuities could overcome behavioral obstacles and become popular among retirees.

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13

Chen, Anran, Steven Haberman, and Stephen Thomas. "The implication of the hyperbolic discount model for the annuitisation decisions." Journal of Pension Economics and Finance 19, no. 3 (February 7, 2019): 372–91. http://dx.doi.org/10.1017/s1474747218000343.

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AbstractThe low demand for immediate annuities at retirement has been a long-standing puzzle. We show that a hyperbolic discount model can explain this behaviour and results in the attractiveness of long-term deferred annuities. With a set of benchmark assumptions, we find that retirees would be willing to pay a much higher price than the actuarial fair price for annuities with longer deferred periods. Moreover, if governments were to introduce a pre-commitment device which requires pensioners to make annuitisation decisions around 10 years before retirement, the take up rate of annuities could become higher.

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14

Reimann, Kurt W. "Annuities as Areas." College Mathematics Journal 18, no. 1 (January 1987): 45. http://dx.doi.org/10.2307/2686316.

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15

DIRER, ALEXIS. "Flexible Life Annuities." Journal of Public Economic Theory 12, no. 1 (February 2010): 43–55. http://dx.doi.org/10.1111/j.1467-9779.2009.01446.x.

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16

d'Albis, Hippolyte, and Johanna Etner. "Illiquid life annuities." Journal of Public Economic Theory 20, no. 2 (June 2, 2017): 277–97. http://dx.doi.org/10.1111/jpet.12253.

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17

Dufresne, Daniel. "Stochastic Life Annuities." North American Actuarial Journal 11, no. 1 (January 2007): 136–57. http://dx.doi.org/10.1080/10920277.2007.10597441.

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18

Reimann, Kurt W. "Annuities as Areas." College Mathematics Journal 18, no. 1 (January 1987): 45–47. http://dx.doi.org/10.1080/07468342.1987.11973006.

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19

Shaffer, Sherrill. "Annuities and inflation." Atlantic Economic Journal 17, no. 1 (March 1989): 96. http://dx.doi.org/10.1007/bf02303286.

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20

Alpman, Burcu, and Deniz Ünal. "Accelerating the premiums for annuities, life annuities and life insurance." Communications in Statistics - Theory and Methods 49, no. 7 (June 3, 2019): 1665–94. http://dx.doi.org/10.1080/03610926.2018.1564329.

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21

Milne, Ronald A., and Glenn Vent. "Variable Lifetime Annuities: Can You Live Long Enough To Receive Fair Value?" Journal of Applied Business Research (JABR) 15, no. 2 (August 30, 2011): 49. http://dx.doi.org/10.19030/jabr.v15i2.5678.

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<span>This article presents an analysis of variable lifetime annuities and quantifies the advantages and disadvantages associated with this type of instrument. Given recent long-term rates of return and current low inflation rates, variable annuity contracts provide an effective means of compensating for inflation. An individual only needs to invest a small portion of retirement funds in variable annuities to protest the entire portfolio against the risk of long-term inflation without the risk of having ones entire retirement income based on variable annuities.</span>

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22

Marumoagae, Motseotsile Clement. "Deprivation of Retirement Benefits on Divorce through Living Annuities in South Africa." Journal of African Law 66, no. 1 (November 2, 2021): 151–74. http://dx.doi.org/10.1017/s0021855321000413.

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AbstractThis article discusses the law regulating living annuities when spouses in South Africa are divorcing. It demonstrates that South African courts have interpreted the law to prejudice non-member spouses financially. It argues that courts have failed to consider matrimonial principles when determining whether living annuities are susceptible to being shared on divorce. It argues further that adequate consideration of matrimonial principles will render it impossible for retirement fund members to prejudice their spouses financially by purchasing living annuities without the consent of such spouses, particularly when married in community of property. Disregarding matrimonial law principles may lead to deprivation of property.

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23

Jung Min, Lee, Ju Hyo Chan, and Lee Hangsuck. "Risk Management of Portfolio of Variable Annuities and Equity-indexed Annuities." Korean Insurance Journal 101 (January 31, 2015): 33–66. http://dx.doi.org/10.17342/kij.2015.101.2.

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24

Yakubova, U., N. Parpieva, and N. Mirkhodjaeva. "Some Notes on Payments Streams." Bulletin of Science and Practice, no. 2 (February 15, 2023): 321–28. http://dx.doi.org/10.33619/2414-2948/87/37.

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The article discusses such concepts as the payment’s streams and financial annuities, credit accounts. The generalizing characteristics of payments streams, the increased amount of constant annuity postnumerando are given. The formulas of the incremented sum are considered, as well as the current value of constant annuities postnumerando.

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25

Castellares, Fredy, and Artur J. Lemonte. "On Numerical Problems in Computing Life Annuities Based on the Makeham–Beard Law." Mathematica Slovaca 73, no. 5 (October 1, 2023): 1317–24. http://dx.doi.org/10.1515/ms-2023-0096.

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ABSTRACT Analytic expressions for the single and joint life annuities based on the Makeham–Beard mortality law have been derived recently in the literature, which depend on special mathematical functions such as hypergeometric functions. We verify that the arguments of the hypergeometric functions in the analytic expressions for the single and joint life annuities may assume values very close to unity (boundary of the convergence radius), and so numerical problems may arise when using them in practice. We provide, therefore, alternative analytic expressions for the single and joint life annuities where the arguments of the hypergeometric functions in the new analytic expressions do not assume values close to one.

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26

Brown, Jeffrey R. "Financial Education and Annuities." OECD Journal: General Papers 2008, no. 3 (February 19, 2009): 173–215. http://dx.doi.org/10.1787/gen_papers-v2008-art20-en.

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27

Davidoff, Thomas, Jeffrey R. Brown, and Peter A. Diamond. "Annuities and Individual Welfare." American Economic Review 95, no. 5 (November 1, 2005): 1573–90. http://dx.doi.org/10.1257/000282805775014281.

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Advancing annuity demand theory, we present sufficient conditions for the optimality of full annuitization under market completeness which are substantially less restrictive than those used by Menahem E. Yaari (1965). We examine demand with market incompleteness, finding that positive annuitization remains optimal widely, but complete annuitization does not. How uninsured medical expenses affect demand for illiquid annuities depends critically on the timing of the risk. A new set of calculations with optimal consumption trajectories very different from available annuity income streams still shows a preference for considerable annuitization, suggesting that limited annuity purchases are plausibly due to psychological or behavioral biases.

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28

SHESHINSKI, EYTAN. "Refundable Annuities (Annuity Options)." Journal of Public Economic Theory 12, no. 1 (February 2010): 7–21. http://dx.doi.org/10.1111/j.1467-9779.2009.01444.x.

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29

CREMER, HELMUTH, JEAN-MARIE LOZACHMEUR, and PIERRE PESTIEAU. "Collective Annuities and Redistribution." Journal of Public Economic Theory 12, no. 1 (February 2010): 23–41. http://dx.doi.org/10.1111/j.1467-9779.2009.01445.x.

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30

PLATONI, SILVIA. "Asymmetric Information and Annuities." Journal of Public Economic Theory 12, no. 3 (June 2010): 501–32. http://dx.doi.org/10.1111/j.1467-9779.2010.01462.x.

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31

Butterworth, Virginia. "ANNUITIES—THE IRA ALTERNATIVE." Bottom Line 1, no. 2 (February 1988): 41–42. http://dx.doi.org/10.1108/eb025119.

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32

Denuit, Michel, Steven Haberman, and Arthur Renshaw. "Longevity-Indexed Life Annuities." North American Actuarial Journal 15, no. 1 (January 2011): 97–111. http://dx.doi.org/10.1080/10920277.2011.10597611.

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33

Davidoff, Thomas. "Housing, Health, and Annuities." Journal of Risk and Insurance 76, no. 1 (February 10, 2009): 31–52. http://dx.doi.org/10.1111/j.1539-6975.2009.01287.x.

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34

Leigh, Richard. "Annuities and income withdrawal." Pensions: An International Journal 5, no. 2 (January 2000): 147–66. http://dx.doi.org/10.1057/palgrave.pm.5940117.

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35

Blake, David, Andrew Cairns, and Kevin Dowd. "Enhancing annuities with equity." Pensions: An International Journal 7, no. 1 (September 2001): 6–8. http://dx.doi.org/10.1057/palgrave.pm.5940176.

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36

Tiong, Serena. "Valuing Equity-Indexed Annuities." North American Actuarial Journal 4, no. 4 (October 2000): 149–63. http://dx.doi.org/10.1080/10920277.2000.10595945.

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37

Taylor, Richard. "The Economics of Annuities." Geneva Papers on Risk and Insurance - Issues and Practice 29, no. 1 (January 2004): 115–27. http://dx.doi.org/10.1111/j.1468-0440.2004.00276.x.

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38

Vanneste, M., M. J. Goovaerts, and E. Labie. "The distributions of annuities." Insurance: Mathematics and Economics 15, no. 1 (October 1994): 37–48. http://dx.doi.org/10.1016/0167-6687(94)00018-2.

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39

Schaff, Michele L., and Jeffery E. Schaff. "Annuities are not securities: the regulatory Island in Illinois." Journal of Investment Compliance 20, no. 4 (November 4, 2019): 72–74. http://dx.doi.org/10.1108/joic-10-2019-0055.

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Purpose Discusses the significance of the Illinois Supreme Court ruling in Van Dyke v. White, which clarified that annuities are not securities in the state of Illinois, with a particular focus on the ramifications to insurance, brokerage and investment advisory standards of care as well as causes of action for breaches thereof. Design/methodology/approach Describes the Court’s ruling as it relates to the industry going forward. Does not discuss the specifics of the plaintiff’s case or history. Findings The statutory language of Illinois’ securities laws specifically excludes annuities from the definition of securities. For this reason, the Illinois Department of Insurance has sole authority over regulating annuities, giving the Illinois Department of Securities no authority, except to the extent there is an investment advisor breach pursuant to §12(J) of the Illinois Securities Law of 1953. The industry has yet to react or adjust to the Court’s ruling, so there may be a future wave of reactions. Originality/value Assists the reader in understanding the unique regulatory environment of annuities in Illinois, the relevant standards of care related to annuity advice and transactions, and remedies for grievances after the Illinois Supreme Court ruling in Van Dyke v. White.

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40

Chen, An, Manuel Rach, and Thorsten Sehner. "ON THE OPTIMAL COMBINATION OF ANNUITIES AND TONTINES." ASTIN Bulletin 50, no. 1 (January 2020): 95–129. http://dx.doi.org/10.1017/asb.2019.37.

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AbstractTontines, retirement products constructed in such a way that the longevity risk is shared in a pool of policyholders, have recently gained vast attention from researchers and practitioners. Typically, these products are cheaper than annuities, but do not provide stable payments to policyholders. This raises the question whether, from the policyholders' viewpoint, the advantages of annuities and tontines can be combined to form a retirement plan which is cheaper than an annuity, but provides a less volatile retirement income than a tontine. In this article, we analyze and compare three approaches of combining annuities and tontines in an expected utility framework: the previously introduced “tonuity”, a product very similar to the tonuity which we call “antine” and a portfolio consisting of an annuity and a tontine. We show that the payoffs of a tonuity and an antine can be replicated by a portfolio consisting of an annuity and a tontine. Consequently, policyholders achieve higher expected utility levels when choosing the portfolio over the novel retirement products tonuity and antine. Further, we derive conditions on the premium loadings of annuities and tontines indicating when the optimal portfolio is investing a positive amount in both annuity and tontine, and when the optimal portfolio turns out to be a pure annuity or a pure tontine.

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41

ROCHA, ROBERTO, MARCO MORALES, and CRAIG THORBURN. "An empirical analysis of the annuity rate in Chile." Journal of Pension Economics and Finance 7, no. 1 (November 16, 2007): 95–119. http://dx.doi.org/10.1017/s1474747207003113.

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SUMMARYEmpirical analyses of annuities markets have been limited to a few developed countries and restricted by data limitations. Chile provides excellent conditions for research on annuities due to the depth of its market and the availability of data. The paper utilizes a panel of life insurance company data to examine econometrically the main determinants of the annuity rate, defined as the internal rate of return on annuities. The results indicate that the annuity rate is determined by the risk-free interest rate, the share of privately issued higher yield securities in the portfolio of providers, as a proxy for the spread over the risk-free rate, the leverage of providers, the level of broker's commissions, the market share of individual providers, the level of the premium, and the degree of market competition. The results also show that efforts to improve market transparency produced structural shifts in the parameters of the annuity rate equation. The results are consistent with separate research on money's worth ratios, and indicate the need to develop appropriate financial instruments, allowing providers to hedge their risks while extracting higher returns, and also to ensure competition and transparency in annuities markets, in order to ensure good outcomes for annuitants.

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42

Lazar, D. "A note on pricing inflation-indexed life annuities." Acta Oeconomica 57, no. 4 (December 1, 2007): 363–76. http://dx.doi.org/10.1556/aoecon.57.2007.4.3.

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This paper deals with the topic of inflation protection of pensions and the pricing process for inflation-indexed life annuities. Several ways of partial indexation of pensions are taken into consideration. Future inflation paths are obtained by simulation of a stochastic time series model. The main advantage of the proposed methodology is that it allows the pricing of partially inflation-indexed pensions. The pricing process is based on the hypothesis that the annuities provider guarantees a certain level of the real interest rate. Certain numerical results are obtained. Taking into account that inflation is generated by autoregressive processes of order one AR(1), empirical distributions of the expected present value (EPV) are determined for some partial inflation-indexed life annuities. Numerical results achieved for an AR(1) model that describes the evolution of the inflation rate in Spain during the period 1962–2005 are also presented. Results gained allow the comparison of the mean and standard deviation calculated on the basis of empirical distributions of the EPV for various types of partially indexed annuities, and also for various values of AR(1) model parameters. By flexible offers, insurers may meet the expectations of the annuitants, regarding both price and guaranteed protection against inflation.

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OLIVIERI, ANNAMARIA, and ERMANNO PITACCO. "Solvency requirements for pension annuities." Journal of Pension Economics and Finance 2, no. 2 (July 2003): 127–57. http://dx.doi.org/10.1017/s1474747203001276.

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This paper deals with solvency requirements for life annuities portfolios and funded pension plans. Particular emphasis is devoted to longevity risk, i.e. the risk arising from uncertainty in future mortality trends. This risk must be faced by insurance companies and pension plans that have guaranteed lifelong payoffs.Solvency is investigated referring to immediate annuities, and hence the so-called decumulation phase is addressed. To assess solvency, assets are compared with the random present value of liabilities. Several requirements are considered, each leading to a required asset level that must be financed both with premiums (or contributions) and capital allocation.

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Pitacco, Ermanno, and Daniela Y. Tabakova. "Special-Rate Life Annuities: Analysis of Portfolio Risk Profiles." Risks 10, no. 3 (March 13, 2022): 65. http://dx.doi.org/10.3390/risks10030065.

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Special-rate life annuities are life annuity products whose single premium is based on a mortality assumption driven (at least to some extent) by the health status of the applicant. The health status is ascertained via an appropriate underwriting step (which explains the alternative expression “underwritten life annuities”). Better annuity rates are then applied in presence of poor health conditions. The worse the health conditions, the smaller the modal age at death (as well as the expected lifetime), but the higher the variance of the lifetime distribution. The latter aspect is due to significant data scarcity as well as to the mix of possible pathologies leading to each specific rating class. A higher degree of (partially unobservable) heterogeneity inside each sub-portfolio of special-rate annuities follows, and this results in a higher variability of the total portfolio payout. The present research aims at analyzing the impact of extending the life annuity portfolio by selling special-rate life annuities. Numerical evaluations have been performed by adopting a deterministic approach as well as a stochastic one, according to diverse assumptions concerning both lifetime distributions and portfolio structure and size. Our achievements witness the possibility of extending the annuity business without taking huge amounts of risk. Hence, the risk management objective “enhancing the company market share” can be pursued without significant worsening of the annuity portfolio risk profile.

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THORBURN, CRAIG, ROBERTO ROCHA, and MARCO MORALES. "An analysis of money's worth ratios in Chile." Journal of Pension Economics and Finance 6, no. 3 (October 29, 2007): 287–312. http://dx.doi.org/10.1017/s1474747207003150.

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AbstractEmpirical analyses of annuities markets have been limited to a few developed countries and restricted by data limitations. Chile provides excellent conditions for research on annuities due to the depth of its market and the availability of data. The paper utilizes an extensive dataset on individual annuities to examine econometrically a measure of market performance – money's worth ratios (MWRs), or the ratio of the expected present value of annuity payments to the premium. The results show that annuitants in Chile have generally got a good deal for their premiums, as indicated by MWRs higher than one and also higher than those estimated for other countries. The difference between Chile and other countries is striking considering that annuities in Chile are indexed to prices. The wide range of indexed instruments in Chile, allowing providers to hedge their risks while extracting higher returns, helps explain the difference. The high degree of market competition has also contributed to this outcome. Efforts to improve market transparency through a new electronic quotation system have decreased the dispersion of MWRs. Finally, MWRs tend to decrease for contracts with longer durations, reflecting pricing for higher longevity and reinvestment risks. These results are consistent with separate research on the annuity rate, and indicate the need to ensure competition and market transparency, as well as to develop appropriate financial instruments for providers in order to ensure good outcomes for annuitants.

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Brown, Jeffrey R., Arie Kapteyn, Erzo F. P. Luttmer, and Olivia S. Mitchell. "Cognitive Constraints on Valuing Annuities." Journal of the European Economic Association 15, no. 2 (April 1, 2017): 429–62. http://dx.doi.org/10.1093/jeea/jvw009.

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Abstract This paper documents consumers’ difficulty valuing life annuities. Using a purpose-built experiment in the American Life Panel, we show that the prices at which people are willing to buy annuities are substantially below the prices at which they are willing to sell them. We also find that buy values are negatively correlated with sell values and that the sell–buy valuation spread is negatively correlated with cognition. This spread is larger for those with less education, weaker numerical abilities, and lower levels of financial literacy. Our evidence contributes to the emerging literature on heterogeneity in financial decision-making abilities, particularly regarding retirement payouts. (JEL: D14, D91, G11, H55)

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陳心儀, 陳心儀. "個人在投保年金保險各種給付之稅負解析." 月旦財稅實務釋評 21, no. 21 (September 2021): 038–45. http://dx.doi.org/10.53106/270692572021090021005.

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Bothwell, James. "‘Until he Receive the Equivalent in Land and Rent’:1 the Use of Annuities as Endowment Patronage in the Reign of Edward III." Historical Research 70, no. 172 (June 1, 1997): 146–69. http://dx.doi.org/10.1111/1468-2281.00037.

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Abstract This article investigates Edward III's use of annuities for endowing a number of men promoted, or to be promoted, to the parliamentary peerage. It examines the two types of annuity Edward used–those paid through the exchequer and those paid direct from royal revenue sources–and the way he used them. Exchequer annuities are shown to have been somewhat more reliable–though, for a number of reasons, most of Edward's ‘new men’ seem to have preferred the source‐based variety. More importantly, it argues that Edward's use of annuities was directed primarily not at bettering permanently the position of many of these men and their families, but rather towards increasing royal control–dependent, as annuitants were, upon the king's continuing favour. Through this programme Edward III was able to influence the composition and behaviour of the parliamentary peerage to a point where his rule has become a byword for good royal/noble relations in the later middle ages.

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Kenigsberg, Matthew B., and Prasenjit Dey Mazumdar. "Legacy Stabilization Using Income Annuities." Journal of Retirement 1, no. 2 (October 31, 2013): 61–78. http://dx.doi.org/10.3905/jor.2013.1.2.061.

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Abraham, Katharine G., and Benjamin H. Harris. "The Market for Longevity Annuities." Journal of Retirement 3, no. 4 (April 30, 2016): 12–27. http://dx.doi.org/10.3905/jor.2016.3.4.012.

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