Over the next years, the ageing profile of the UK population will lead to a sharp increase in the volumes of pension annuity sales. Every individual that participates in a defined contribution occupational or a personal pension scheme is obliged to convert the capital accumulated into a regular post-retirement income by purchasing an annuity before the age of 75. To ensure a more competitive ma...

We investigate whether a rare event (like the default of the annuity provider) can explain the annuity market participation puzzle. High risk aversion is needed to change behavior in the presence of such a disastrous shock but higher risk aversion also makes annuities more valuable. Therefore, these rare events are unlikely candidates to explain the low take-up of voluntary annuities. JEL Class...

We develop an optimal asset allocatlon model for the accumulation phase of a definedcontribution pension plan in the presence of non-hedgeable salary risk. The model considers a policyholder who each penod, r. contributes a constant proportlon. rc. of his salary, S(I), to a personal pension fund, W(r). At the time of retirement, T. the fund IS converted into an annuity paying W( T)/cr( T) each ...

We develop an optimal asset allocation model for the accumulation phase of a definedcontribution pension plan in the presence of non-hedgeable salary risk. The model considers a policyholder who each period, t, contributes a constant proportion, π, of his salary, S(t), to a personal pension fund, W(t). At the time of retirement, T , the fund is converted into an annuity paying W (T)/a(T) each p...

This paper analyzes the savings and health care impacts of mortali~ coniirzgenf claims, defined here as income measures, such as annuities and life-insurance, under which earned income is contingent on the length of one’s life. The postwar increase in mandatory annuity and lifeinsurance programs, as well as the rapid increase in life-expectancy, motivates a better understanding of the effects t...

Orientation: As a standard practice, retirement capital is converted into either an immediate life annuity (annuitisation), affording significant protection against longevity risk or living (self-annuitisation), exposing to volatile investment returns. Research purpose: This article presents number of exploratory factors (based on puzzle literature) that associate with retirees’ satisfaction le...

The under-development of existing annuity markets coupled with the secular trend away from traditional pensions towards defined contribution accounts in the U.S. raises significant concerns about the adequacy of retirement income for future retirees. We develop dynamic programming techniques to evaluate the efficacy of policies designed to address this concern by encouraging annuitization. Our ...

The purpose of this paper is to analyze the problem of the fair valuation of annuities contracts. The market consistent valuation of these products requires a pricing framework which includes the two main sources of risk affecting the value of the annuity, i.e. interest rate risk and mortality risk. As the IASB has not set any specific guidelines as to which models are the most appropriate for ...