Annuities in (N)DC Pension Schemes: Design, Heterogeneity, and Estimation Issues

Author(s)
Palmer, Edward
de Gosson de Varennes, Yuwei Zhao
Date Issued
July 26, 2019
Subjects
Pensioni
Previdenza
Abstract
This paper identifies and discusses four issues in creating annuities in (nonfinancial) defined contribution (NDC) schemes that are essential for systems’ financial stability and fair inter/intragenerational redistribution. The first issue is the choice between incorporating the rate of return into the annuity or into the exogenous indexation. The second issue is in choosing a projection method for life expectancy that produces systematically unbiased estimates. The third issue is at what age the projection of life expectancy is to be fixed over the remaining lifetime of the annuity. The final issue is the prevalence of socioeconomic heterogeneity within the insurance pool.
Citation
Palmer E., de Gosson de Varennes Y. Z. (2019), Annuities in (N)DC Pension Schemes: Design, Heterogeneity, and Estimation Issues, Roma, INAPP, WP, n. 23 <https://oa.inapp.org/handle/20.500.12916/460>
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Working Paper
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