Publication:
Annuity Markets in Comparative Perspective : Do Consumers Get Their Money's Worth?

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dc.contributor.authorJames, Estelle
dc.contributor.authorVittas, Dimitri
dc.date.accessioned2014-08-27T18:49:55Z
dc.date.available2014-08-27T18:49:55Z
dc.date.issued2000-11
dc.description.abstractPension reforms normally focus on the accumulation phase, plus term insurance that provides bnefits for the disabled and for dependent survivors, all of which are immediate concerns. Decumulation of the capital in workers' retirement savings accounts appears to be far in the future. But in the second generation of reforms, countries have begun paying attention to eventual decumulation--either through gradual withdrawals or through annuitization, which provides longevity insurance. At this point, it becomes important to learn whether annuity markets exist and how they operate. The authors summarize preliminary results of a continuing research project that analyzes annuity markets in Australia, Canada, Chile, Israel, Singapore, Switzerland, and the United Kingdom. They focus on understanding whether annuity markets can be relied upon to provide reliable retirement income at reasonable prices. One way to approach this question is to explore whether the expected payouts and the "money's-worth ratio" differ across countries, and if so, why, and what light can be thrown on the existence and amount of adverse selection. Annuity markets are poorly designed for various reasons: worker myopia, precautionary and bequest saving (not erved by most annuity products), distrust of insurance companies (and unwillingness to turn sizeable savings over to them), adverse selection, and the crowding-out effect of social security (Which automatically annuitizes the largest share of people's retirement wealth). Preliminary findings suggest that the cost of annuities is lower than might be expected. When the risk-free discount rate is used, the money's-worth ratios of nominal annuities based on annuitant mortality tables exceed 90 percent--neither the industry "take" nor the effects of adverse selection appear to be as large as anticipated. But real annuities (in Chile, Israel, and the United Kingdom) have money's-worth ratios 7 to 9 percent lower than those of nominal annuities. And when the "riskier" corporate bond rate is used for discounting purposes, there is a further 7 percent reduction. The main policy issues include public versus private provision, the role of insurance companies in term and risk intermediation, the level of compulsory annuitization, and the need for robust regulation of annuity providers.en
dc.identifierhttp://documents.worldbank.org/curated/en/2000/11/717423/annuity-markets-comparative-perspective-consumers-moneys-wotrth
dc.identifier.doi10.1596/1813-9450-2493
dc.identifier.urihttps://hdl.handle.net/10986/19775
dc.languageEnglish
dc.language.isoen_US
dc.publisherWorld Bank, Washington, DC
dc.relation.ispartofseriesPolicy Research Working Paper;No. 2493
dc.rightsCC BY 3.0 IGO
dc.rights.urihttp://creativecommons.org/licenses/by/3.0/igo/
dc.subjectACTUARIES
dc.subjectADVERSE SELECTION
dc.subjectANNUITIES
dc.subjectANNUITY
dc.subjectANNUITY MARKETS
dc.subjectANNUITY OPTION
dc.subjectANNUITY PROVIDERS
dc.subjectASYMMETRIC INFORMATION
dc.subjectBENEFICIARIES
dc.subjectBOND RATE
dc.subjectCAPITAL MARKETS
dc.subjectCOMMISSIONS
dc.subjectCONSUMERS
dc.subjectCROWDING
dc.subjectDISCOUNT RATES
dc.subjectECONOMISTS
dc.subjectELASTICITIES
dc.subjectELASTICITY OF DEMAND
dc.subjectEMPIRICAL EVIDENCE
dc.subjectFINANCIAL INSTRUMENTS
dc.subjectFINANCIAL MARKETS
dc.subjectFUTURE MORTALITY IMPROVEMENTS
dc.subjectGOVERNMENT REGULATIONS
dc.subjectGRADUAL WITHDRAWALS
dc.subjectGUARANTEED PERIOD
dc.subjectHEALTH STATUS
dc.subjectIMPROVEMENTS IN HEALTH
dc.subjectINCOME DISTRIBUTION
dc.subjectINDEXED ANNUITY
dc.subjectINDEXED BONDS
dc.subjectINFLATION
dc.subjectINFLATION RISK
dc.subjectINSURANCE
dc.subjectINSURANCE COMPANIES
dc.subjectINSURANCE COMPANY
dc.subjectINSURANCE COMPANY INVESTMENTS
dc.subjectINSURANCE INDUSTRY
dc.subjectINSURANCE PRODUCTS
dc.subjectINSURANCE PROVIDERS
dc.subjectINSURANCE RISK
dc.subjectINTEREST RATES
dc.subjectINVESTMENT DIVERSIFICATION
dc.subjectINVESTMENT INSURANCE
dc.subjectINVESTMENT RETURNS
dc.subjectJOINT ANNUITY
dc.subjectLIFE ANNUITIES
dc.subjectLIFE EXPECTANCIES
dc.subjectLIFE EXPECTANCY
dc.subjectLIFE INSURANCE
dc.subjectLIFE INSURANCE COMPANIES
dc.subjectLONGEVITY INSURANCE
dc.subjectMANDATORY RETIREMENT
dc.subjectMANDATORY SYSTEM
dc.subjectMORTALITY
dc.subjectMORTALITY TABLES
dc.subjectMULTI-PILLAR SYSTEM
dc.subjectMULTI-PILLAR SYSTEMS
dc.subjectOCCUPATIONAL PENSIONS
dc.subjectPENSION FUND
dc.subjectPENSION FUNDS
dc.subjectPENSION REFORMS
dc.subjectPENSION SYSTEM
dc.subjectPENSIONERS
dc.subjectPERSONAL PENSIONS
dc.subjectPOLICY RESEARCH
dc.subjectPORTFOLIO RETURN
dc.subjectPREMIUMS
dc.subjectPRESENT VALUE
dc.subjectPRICE CHANGES
dc.subjectPRIVATE INSURANCE
dc.subjectPRIVATE INSURANCE COMPANIES
dc.subjectPRIVATE SECTOR
dc.subjectREGULATION OF INSURANCE
dc.subjectREINVESTMENT RISK
dc.subjectREPLACEMENT RATE
dc.subjectRESERVES
dc.subjectRETIREES
dc.subjectRETIREMENT INCOME
dc.subjectRETIREMENT SAVINGS
dc.subjectRISK AVERSION
dc.subjectRISK INTERMEDIATION
dc.subjectRISK PREMIUM
dc.subjectRISK-FREE RATE
dc.subjectRISKY RATE
dc.subjectSAVINGS
dc.subjectSOCIAL SECURITY
dc.subjectSTOCKHOLDERS
dc.titleAnnuity Markets in Comparative Perspective : Do Consumers Get Their Money's Worth?en
dspace.entity.typePublication
okr.crossref.titleAnnuity Markets in Comparative Perspective: Do Consumers Get Their Money’s Worth?
okr.date.disclosure2000-11-30
okr.date.doiregistration2025-04-10T09:28:16.598812Z
okr.doctypePublications & Research::Policy Research Working Paper
okr.doctypePublications & Research
okr.docurlhttp://documents.worldbank.org/curated/en/2000/11/717423/annuity-markets-comparative-perspective-consumers-moneys-wotrth
okr.globalpracticeFinance and Markets
okr.globalpracticeHealth, Nutrition, and Population
okr.guid804791468760164780
okr.identifier.doi10.1596/1813-9450-2493
okr.identifier.externaldocumentum000094946_00121302021465
okr.identifier.internaldocumentum717423
okr.identifier.reportWPS2493
okr.language.supporteden
okr.pdfurlhttp://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2000/12/19/000094946_00121302021465/Rendered/PDF/multi_page.pdfen
okr.region.administrativeEast Asia and Pacific
okr.region.administrativeEurope and Central Asia
okr.region.administrativeLatin America & Caribbean
okr.region.countryAustralia
okr.region.countryChile
okr.region.countryIsrael
okr.region.countrySingapore
okr.region.countrySwitzerland
okr.region.countryUnited Kingdom
okr.region.geographicalNorth America
okr.sectorPublic Administration, Law, and Justice :: Compulsory pension and unemployment insurance
okr.sectorFinance :: Non-compulsory pensions, insurance and contractual savings
okr.themeSocial protection and risk management
okr.topicFinance and Financial Sector Development::Non Bank Financial Institutions
okr.topicInsurance and Risk Mitigation
okr.topicPensions and Retirement Systems
okr.topicEnvironmental Economics and Policies
okr.topicHealth Economics and Finance
okr.topicHealth, Nutrition and Population
okr.unitFinance, Development Research Group
okr.volume1
relation.isSeriesOfPublication26e071dc-b0bf-409c-b982-df2970295c87
relation.isSeriesOfPublication.latestForDiscovery26e071dc-b0bf-409c-b982-df2970295c87
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