Mandatory annuitization and money's worth: evidence from Singapore

Joelle Fong, Jackie Li

Research output: Contribution to journalArticlepeer-review

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
JournalJournal of Pension Economics and Finance
DOIs
Publication statusE-pub ahead of print - 27 Apr 2021

Keywords

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

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