Compulsory and voluntary annuities markets in the UK

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Compulsory and voluntary annuities markets in the UK

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dc.contributor.author Cannon, Edmund en_GB
dc.contributor.author Tonks, Ian en_GB
dc.date.accessioned 2010-04-13T15:38:53Z en_GB
dc.date.accessioned 2011-01-25T10:28:30Z en_US
dc.date.accessioned 2013-03-20T11:11:04Z
dc.date.issued 2010-01 en_GB
dc.description.abstract This paper describes the operation of both the compulsory pension annuity and voluntary annuity markets in the UK. The paper reports on the movement of UK annuity price quotes in the voluntary market from 1957-2009, and in the pension annuity market from 1994 to 2009, and examines whether annuities were fairly priced over this period. The paper computes the money’s worth of annuities, and finds that on average the money’s worth in the voluntary market over the sample period for 65-year old males has been a very high 98%. In the larger compulsory pension annuity over a shorter sample period we estimate that the money’s worth for 65-year old males has been 89%, and for 65-year old females has been a similar but slightly larger 90%. Taking into account load factors associated with annuity contracts and in comparison with other financial and insurance products this implies that annuities are fairly priced. However the value of the money’s worth is sensitive to the assumptions made about life expectancy, and we explain the assumptions made about the appropriate life tables to apply to annuitants in these annuity markets. There is some evidence that money’s worth has fallen since 2002. We discuss a number of factors that could have effected the fall in money’s worth, including: changes in insurance regulation; changes in industrial concentration; an insurance cycle; pricing of mortality uncertainty and the growth in the impaired lives market. en_GB
dc.description.sponsorship Part of this work arose out of a project at the Department of Work and Pensions en_GB
dc.identifier.uri http://hdl.handle.net/10036/96441 en_GB
dc.language.iso en en_GB
dc.publisher University of Exeter Business School en_GB
dc.relation.ispartofseries Xfi Centre for Finance and Investment working papers en_GB
dc.relation.ispartofseries 10/01 en_GB
dc.relation.url http://xfi.exeter.ac.uk/workingpapers/1001.pdf en_GB
dc.subject annuities en_GB
dc.subject annuity markets en_GB
dc.subject pension replacement ratio en_GB
dc.title Compulsory and voluntary annuities markets in the UK en_GB
dc.type Working Paper en_GB
dc.date.available 2010-04-13T15:38:53Z en_GB
dc.date.available 2011-01-25T10:28:30Z en_US
dc.date.available 2013-03-20T11:11:04Z
dc.identifier.issn 1743-548X en_GB
dc.description Working paper en_GB


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