Annuity Markets
Edmund Cannon and Ian Tonks
Abstract
Governments around the world are responding to the rising ratio of elderly-to-young persons (‘The Pensions Crisis’) by shifting their pension policies away from pay-as-you-go systems towards individual savings schemes. Annuity markets convert retirement savings into an income stream for the lifetime of the pensioner, and understanding how annuity markets function is important for public policy. This book studies these annuity markets. The book starts by outlining the context of public policy towards pensions, and explains the different types of annuities available, focusing on the UK — which h ... More
Governments around the world are responding to the rising ratio of elderly-to-young persons (‘The Pensions Crisis’) by shifting their pension policies away from pay-as-you-go systems towards individual savings schemes. Annuity markets convert retirement savings into an income stream for the lifetime of the pensioner, and understanding how annuity markets function is important for public policy. This book studies these annuity markets. The book starts by outlining the context of public policy towards pensions, and explains the different types of annuities available, focusing on the UK — which has the largest annuity market in the world. It examines how annuities are priced, and describes the techniques of mortality measurement. As a background, it provides a history of annuities, and the experience of annuity markets in a number of other countries. The book outlines the economic theory behind annuities, and explains how annuities insure consumers against longevity risks. It goes on to describe how annuities markets function: how they work and whether they are efficient, leading onto a discussion of the annuity puzzle, including behavioural explanations. The book concludes by discussing the regulatory framework, assets available to back annuity liabilities, and recent developments in annuity markets.
Keywords:
annuities,
annuity markets,
longevity risk,
mortality,
pensions crisis,
defined contribution,
life insurance,
money's worth,
annuity puzzle
Bibliographic Information
| Print publication date: 2008 |
Print ISBN-13: 9780199216994 |
| Published to Oxford Scholarship Online: January 2009 |
DOI:10.1093/acprof:oso/9780199216994.001.0001 |
Authors
Affiliations are at time of print publication.
Edmund Cannon, author
Senior Lecturer in Economics, University of Bristol
Author Webpage
Ian Tonks, author
Professor of Finance, University of Exeter
Author Webpage
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