Mandatory annuitization and money's worth: evidence from Singapore

Joelle H. Fong, Jackie Li

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Abstract

This paper examines the impact of uncertainties in the future trends of mortality on annuity values in Singapore's compulsory purchase market. We document persistent population mortality improvement trends over the past few decades, which underscores the importance of longevity risk in this market. Using the money's worth framework, we find that the life annuities delivered expected payouts valued at 1.019–1.185 (0.973–1.170) per dollar of annuity premium for males (females). Even in a low mortality improvement scenario, the annuities provide an expected value exceeding 0.950. This suggests that participants in the national annuity pool have access to attractively priced annuities, regardless of sex, product, and premium invested.
Original languageEnglish
Pages (from-to)405-424
Number of pages20
JournalJournal of Pension Economics and Finance
Volume21
Issue number3
Early online date27 Apr 2021
DOIs
Publication statusPublished - Jul 2022

Bibliographical note

© The Author(s), 2021. Published by Cambridge University Press. Version archived for private and non-commercial use with the permission of the author/s and according to publisher conditions. For further rights please contact the publisher.

Keywords

  • Annuities
  • insurance
  • longevity risk
  • pension policy
  • retirement
  • stochastic mortality model

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