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

James, Estelle ; Vittas, Dimitri

World Bank, Washington, DC

关键词: ACTUARIES;    ADVERSE SELECTION;    ANNUITIES;    ANNUITY;    ANNUITY MARKETS;   

DOI  :  10.1596/1813-9450-2493
RP-ID  :  WPS2493

学科分类：社会科学、人文和艺术（综合）

来源: World Bank Open Knowledge Repository

【 摘 要 】

Pension reforms normally focus on theaccumulation phase, plus term insurance that providesbnefits for the disabled and for dependent survivors, all ofwhich are immediate concerns. Decumulation of the capital inworkers' retirement savings accounts appears to be farin the future. But in the second generation of reforms,countries have begun paying attention to eventualdecumulation--either through gradual withdrawals or throughannuitization, which provides longevity insurance. At thispoint, it becomes important to learn whether annuity marketsexist and how they operate. The authors summarizepreliminary results of a continuing research project thatanalyzes annuity markets in Australia, Canada, Chile,Israel, Singapore, Switzerland, and the United Kingdom. Theyfocus on understanding whether annuity markets can be reliedupon to provide reliable retirement income at reasonableprices. One way to approach this question is to explorewhether the expected payouts and the"money's-worth ratio" differ acrosscountries, and if so, why, and what light can be thrown onthe existence and amount of adverse selection. Annuitymarkets are poorly designed for various reasons: workermyopia, precautionary and bequest saving (not erved by mostannuity products), distrust of insurance companies (andunwillingness to turn sizeable savings over to them),adverse selection, and the crowding-out effect of socialsecurity (Which automatically annuitizes the largest shareof people's retirement wealth). Preliminary findingssuggest that the cost of annuities is lower than might beexpected. When the risk-free discount rate is used, themoney's-worth ratios of nominal annuities based onannuitant mortality tables exceed 90 percent--neither theindustry "take" nor the effects of adverseselection appear to be as large as anticipated. But realannuities (in Chile, Israel, and the United Kingdom) havemoney's-worth ratios 7 to 9 percent lower than those ofnominal annuities. And when the "riskier"corporate bond rate is used for discounting purposes, thereis a further 7 percent reduction. The main policy issuesinclude public versus private provision, the role ofinsurance companies in term and risk intermediation, thelevel of compulsory annuitization, and the need for robustregulation of annuity providers.