National Annuity Markets FEATURES AND IMPLICATIONS

/RÉSUMÉ National annuity markets: features and implications This paper describes a number of national annuity markets, the types of products typically available, the demand for these products, the value for money on offer and the dynamics of the supply side. It explores supply and demand characteristics, asking what the main forces are that drive these dynamics and how they might be recognised and responded to by policymakers Marchés nationaux des rentes viagères: caractéristiques et implications Ce papier décrit un certain nombre de marchés nationaux des rentes viagères, le type de produits disponibles, la demande pour ces produits, la valeur de l'argent sur l'offre et la dynamique de la demande. Il explore les caractéristiques de l'offre et de la demande, recherchant quelles sont les forces guidant cette dynamique et comment elles pourraient être reconnues et traitées par les responsables politiques. Mots clés: Marches des rentes viagères, money's worth ratios, l'offre et la demande des rentes viagères. Executive summary Annuity markets are growing in importance and will continue to do so for some time. The systematic transfer of investment and longevity risk from institutions to individuals taking place across the world stimulates the need for financial vehicles that convert accumulated retirement savings into an income stream appropriate to protect against these risks. This paper describes a number of national annuity markets, the types of products typically available, the demand for these products, the value for money on offer and the dynamics of the supply side. It should assist policymakers, in both fledgling and mature annuity markets, to understand the types of problems affecting the demand for and supply of annuities and the range of options available from other parts of the world. In an effort to describe the variety of national annuity markets, three broad categories are proposed. Markets of the immediate annuity type, the United Kingdom, United States, Canada and South Africa, for example, more recently joined by Chile and other individual account reformers, are dominated by annuities that are purchased at retirement, converting a lump sum into a life time income stream. Guaranteed deferred annuity markets form a second group. These products, for example, in Denmark, Belgium and Germany, are typically purchased in the form of deferred annuities during the working years. They attract a relatively low guaranteed return throughout the accumulation and payout phase with bonuses added as investment returns emerge. Annuities in the Netherlands show attributes of both …