Estimating price elasticities of financial services: the case of UK personal pensions

The present study estimates demand and supply functions of the UK market for 25-year maturity unitlinked (UL) personal pensions for the years 1998 to 2000. It exploits the unique information contained in the PIA disclosure surveys on reduction in yields and new business. The results suggest the popular view about the business of life offices “insurance products are sold, not bought” does not mean that demand is price independent. From the 25 years perspective adopted here, the new stakeholder regime in the UK does not appear to have had a significant impact on new UL personal pensions business written in 1999 or 2000. Recent restructuring seems to have a negative impact on the quantities sold. The results are obtained by using several parametric and recently introduced semiparametric estimators. JEL Code: D12, D23, G22, G23, C140, C300