Individual Welfare Gains from Deferred Life-Annuities under Stochastic Mortality
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Thomas Post
At the end of the deferment period a deferred annuity’s policyholder can choose between receiving annuity payouts or the capital accumulated. Considering stochastic mortality improvements, this is a valuable option for the policyholder. Whenever mortality improves less than expected at contract inception, the policyholder will choose the lump-sum and buy an annuity at current market prices. Otherwise, he will retain the more favorable deferred annuity. We use a life-cycle model and calculate the welfare gains of deferred annuities considering stochastic mortality improvements. Deferred annuities are found to substantially improve the welfare of an individual. The option feature is especially valuable in the presence of adverse selection problems. The results derived are relevant for individual retirement planning and pension system design.
©2012 Walter de Gruyter GmbH & Co. KG, Berlin/Boston
Artikel in diesem Heft
- Featured Article
- Optimal Demand for Insurance with Consumption Commitments
- Individual Welfare Gains from Deferred Life-Annuities under Stochastic Mortality
- Solvency Determinants of Conventional Life Insurers and Takaful Operators
- Urban Public Pension and Economic Growth in China
- Asset Risk Management of Participating Contracts
- Risk Perception of Investors in Initial Public Offer of Shares: A Psychometric Study
Artikel in diesem Heft
- Featured Article
- Optimal Demand for Insurance with Consumption Commitments
- Individual Welfare Gains from Deferred Life-Annuities under Stochastic Mortality
- Solvency Determinants of Conventional Life Insurers and Takaful Operators
- Urban Public Pension and Economic Growth in China
- Asset Risk Management of Participating Contracts
- Risk Perception of Investors in Initial Public Offer of Shares: A Psychometric Study
