Annuities for an ageing world

Substantial research attention has been devoted to the pension accumulation process, whereby employees and those advising them work to accumulate funds for retirement. Until recently, less analysis has been devoted to the pension decumulation process – the process by which retirees finance their consumption during retirement. This gap has recently begun to be filled by an active group of researchers examining key aspects of the pension payout market. One of the areas of most interesting investigation has been in the area of annuities, which are financial products intended to cover the risk of retirees outliving their assets. This paper reviews and extends recent research examining the role of annuities in helping finance retirement consumption. We also examine key market and regulatory factors

International Adverse Selection in Life Insurance and Annuities

This paper evaluates the extent of adverse selection in life insurance and annuities in international markets, for both group and individual products. We also compare results with prior analyses of adverse selection in international annuity markets, focusing on the US, the UK, and Japan. Our results help assess the extent to which life insurers can hedge mortality exposure by writing both life insurance and annuities, and they may be used to determine a normal range for adverse selection in international insurance markets.

Annuities for an Ageing World

Substantial research attention has been devoted to the pension accumulation process, whereby employees and those advising them work to accumulate funds for retirement. Until recently, less analysis has been devoted to the pension decumulation process -- the process by which retirees finance their consumption during retirement. This gap has recently begun to be filled by an active group of researchers examining key aspects of the pension payout market. One of the areas of most interesting investigation has been in the area of annuities, which are financial products intended to cover the risk of retirees outliving their assets. This paper reviews and extends recent research examining the role of annuities in helping finance retirement consumption. We also examine key market and regulatory factors.

International Adverse Selection in Life Insurance and Annuities

This paper evaluates the extent of adverse selection in life insurance and annuities in international markets. We examine the extent of adverse selection in group and individual life insurance. In addition we also compare results with prior analyses of adverse selection in international annuity markets, focusing on the US, UK and Japan. Our results may be used to assess the extent to which life insurers can hedge mortality exposure by writing both life insurance and annuities, and to determine a normal range for adverse selection in international insurance markets

Assessing the Impact of Mortality Assumptions on Annuity Valuation: Cross-Country Evidence

Evaluating the money’s worth of annuities requires one to employ an assumed mortality table. In practice, of course, there are many measures of mortality probabilities including cohort, period, annuity and population mortality tables that differ by age and sex. Each of these tends to differ across countries, as well, making it difficult to compare the working of annuity markets internationally. This paper proposes several methods for comparing alternative mortality tables and illustrates their impact on annuity valuation for men and women in the US, the UK, and Australia. Our results indicate that the relatively lower mortality among older Americans who purchase annuities is equivalent to using a discount rate that is 50-100 basis points below the UK rate for compulsory annuitants, or 10-20 basis points lower than the UK rate for voluntary annuitants. Australian mortality rates are notably lighter than those in both the UK and US

Estimating International Adverse Selection in Annuities

It is well known that purchasers of annuities have lower mortality than the general population. Less widely known is the quantitative extent of this adverse selection and how it varies across countries. This paper proposes and applies several methods for comparing alternative mortality tables and illustrates their impact on annuity valuation for men and women in the US and the UK. Our results indicate that the relatively lower mortality among older Americans who purchase annuities is equivalent to using a discount rate that is 50-100 basis points below the UK rate for compulsory annuitants, or 10-20 basis points lower than the UK rate for voluntary annuitants. We then draw on the mortality experience of over half a billion lives to estimate mortality differentials due to varying degrees of adverse selection controlling for country, gender, and an allowance for mortality improvements. Results show that adverse selection associated with the purchase of individual annuities reduces mortality rates by at least 25% in the international context. We also find that the system of mortality tables used to value Japanese annuities is quite distinct from international norms

Lifetime Earnings Variability and Retirement Wealth

This paper explores how earnings variability is related to retirement wealth. Past research has demonstrated that the average American household on the verge of retirement would need to save substantially more, in order to preserve consumption flows in old age. While several socioeconomic factors have been examined that might explain such problems, prior studies have not assessed the role of earnings variability over the lifetime as a potential explanation for poor retirement prospects. Thus two workers having identical levels of average lifetime earnings might have had very different patterns of earnings variability over their lifetimes. Such differences could translate into quite different retirement wealth outcomes. This paper evaluates the effect of earnings variability on retirement wealth using information supplied by respondents to the Health and Retirement Study (HRS). This is a rich and nationally representative dataset on Americans on the verge of retirement, with responses linked to administrative records from the Social Security Administration. Our research illuminates the key links between lifetime earnings variability and retirement wealth.

Asset Rich and Cash Poor: Retirement Provision and Housing Policy in Singapore

National defined contribution pension systems have long been a mainstay of retirement income in Asia. One of the oldest and best known of these systems is the Singaporean Central Provident Fund, a mandatory retirement scheme managed by the central government for almost a half-century. With required contribution rates that have ranged up to 50%, this program has powerfully shaped asset accumulation patterns and housing portfolios. This paper explores how the structure and design of the Singaporean retirement and housing schemes influence wealth levels and asset mix at retirement. Our model indicates that outcomes rest critically on the interlinked national retirement and housing programs. We show that policies to enhance one program may boost retirement replacement rates but can also lower total wealth in unexpected ways. The lessons we draw may serve as guidance for other countries constructing a national defined contribution retirement system

CRYSTALLIZATION PRESSURES ALONG THE EAST PACIFIC RISE BETWEEN 9.5° AND 14°N

The East Pacific Rise (EPR) is one of the many mid-ocean ridges around the Earth. This research is part of a bigger project that is attempting to understand the magma plumbing systems causing crustal accretion at divergent plate boundaries. The research reported herein was specifically aimed at the northern side of the East Pacific Rise, between 9.5 and 14°N. Chemical composition data for basaltic glasses were collected and analyzed. Normalized chemical datum and pressures of partial crystallization were calculated to investigate the magma chemistry of the ridge. The data was split into 12 Segments based on sample distributions. The average calculated pressures among the Segments range from 100 to 250 MPa, giving depths of partial crystallization from 4.5 to 8 km. This datum suggests that partial crystallization on the EPR takes place close to the base of oceanic crust. However, the northern Segments, F through L, contain larger pressures than the southern Segments. Such high pressures most likely do not represent true partial crystallization, instead the anomalous pressures are likely the result of multiple processes influencing the magma crystallization. Correlations between Al2O3/CaO and MgO, pressure and MgO, and P2O5 and K2O indicate that multiple complex processes are contributing to the magma’s composition, rather than simple crystallization. The Segments encompassing 11 to 11.5°N also contained anomalously high calculated pressures that suggest additional processes are affecting the magma below. Modifications of magma compositions by mantle plumes may account for the variations from typical MORB values.A three-year embargo was granted for this item.Academic Major: Earth Science

Rebuilding Afghanistan’s Higher Educational System: Observations from Kabul

This paper describes the crucial issues and challenges facing Afghanistan’s universities as they begin the demanding task of rebuilding and restructuring their university system after two decades of war and civil unrest. The setting for this qualitative study is a four-day professional development conference for Afghan university presidents and academic deans sponsored and funded by the United Nations Educational, Scientific and Cultural Organization and the Afghanistan Ministry of Higher Education. Cooperative Studies (an NGO, not-for-profit educational organization located in Kansas City) provided a team of academics to Kabul, Afghanistan, to offer professional development workshops. Using the Grounded Theory Methodology as a theoretical framework for this research, data was derived from interactive sessions, questionnaires, informal dialogue, small group sessions and question and answer sessions; the perspectives of the 39 Afghan academic leaders are presented as they describe the problems facing university administrators in their country today. Findings identify these challenges and center on 1) the lack of autonomy; 2) the need for qualified faculty; 3) concerns regarding students’ access and preparation; and 4) concerns about funding and budget issues. Based on these findings, policy suggestions and recommendations are provided