Bringing cost transparency to the life annuity market

Catherine Donnelly, Jens Perch Nielsen, Montserrat Guillen

Research output: Contribution to journalArticle

19 Citations (Scopus)
135 Downloads (Pure)

Abstract

The financial industry has recently seen a push away from structured products and towards transparency. The trend is to decompose products, such that customers understand each component as well as its price. Yet the enormous annuity market combining investment and longevity has been almost untouched by this development.

We suggest a simple decomposed annuity structure that enables cost transparency and could be linked to any investment fund. It has several attractive features: (i) it works for any heterogeneous group; (ii) participants can leave before death without financial penalty; and (iii) participants have complete freedom over their own investment strategy.
Original languageEnglish
Pages (from-to)14-27
Number of pages14
JournalInsurance: Mathematics and Economics
Volume56
DOIs
Publication statusPublished - May 2014

Keywords

  • Investment
  • Mutual risk-sharing
  • Lifetime savings
  • Pooled annuity fund
  • Pensions

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