By Edmund Cannon, Ian Tonks
The Pension drawback issues the altering demographic profile of extra aged and less adolescents within the economic system. knowing and tackling this drawing close situation is a key activity for public coverage. An annuity protects a person from outliving their mark downs, and is important to pensions coverage. This e-book examines the different sorts of annuities on hand, how those annuities are priced, the background of annuities, how annuities markets functionality: how they paintings, and are they effective. It presents a world comparability of annuity markets, and examines fresh advancements in annuity markets.
Governments world wide are moving their pension rules clear of pay-as-you-go platforms in the direction of person mark downs schemes. those discounts must be switched over right into a pension at retirement, and annuity markets offer this functionality. This publication is a complete research of annuity markets. The e-book begins by means of outlining the context of public coverage in the direction of pensions coverage. It then explains the differing kinds of annuities on hand, concentrating on the USA and united kingdom, and the way those annuities are priced, reading pricing and booking equipment from an actuarial viewpoint and likewise describing mortality dimension. the subsequent chapters describe the historical past of annuities, and the adventure of annuity markets in international locations except the united kingdom and US. The ebook then outlines the speculation in the back of annuites, and explains how annuities insure shoppers opposed to sturdiness dangers. the following bankruptcy describes how annuities markets functionality: how they paintings, and whether or not they are effective, top onto a dialogue of the annuity puzzle. The ebook concludes via discussing fresh advancements in annuity markets.
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Dev. 96 Note: This table presents descriptive statistics on the time series of average annuity rates and consol rates over the period 1957–2002 and for the two sub-periods. rates are the consol rate plus a premium based on life expectancy and although the last is trending down, probably with a unit root itself, it is sufﬁciently slow moving and low variance compared with interest rates that it is unlikely to affect the cointegration properties of the series on this relatively short time series.
For example, the annuity may pay a guaranteed income for a temporary period, at the end of which a level annuity with the remaining funds can be purchased. Alternatively, an annuitant may purchase a joint-life annuity to protect against longevity risk for a spouse, but following the death of a spouse, may wish to have the ﬂexibility to revert to a single annuity. Variable annuities are very popular in the USA and Japan. Some insurance companies offer annuities that pay a higher income if the annuitant has a health problem that is likely to reduce life expectancy.
Female age 65 and male age 65 and 70 from 1994 onwards are taken from Moneyfacts and authors’ own calculations. There is a small inconsistency between data in Cannon and Tonks (2004b) and the updated series, shown by the dotted lines between 1993 and 1994 for the relevant series. 2. Immediate (voluntary) annuity rates for men aged 65 Source: Cannon and Tonks (2004b). characteristics that annuity-providers condition on when quoting annuity prices, since life expectancy of women is higher than men, and of younger adults, of both sexes, is higher than older adults.
Annuity Markets by Edmund Cannon, Ian Tonks