Type Of Annuity Research Articles

THE BENEFITS OF FAMILY ANNUITY CALCULATION WITH VINE’S COPULA AND FUZZY INTEREST RATE

One example of a multiple life annuity product (covering more than one person) is a reversionary annuity, which is a life annuity product for two or more annuitants whose annuity payments will begin after one of the annuitants specified in the contract dies first until the other annuitant also dies. This type of annuity is modified into a family annuity consisting of husband, wife, and child. The marginal distribution is constructed from a combined model of several mortality models such as Heligman-Pollard, Costakis, and Kannisto-Makeham models to capture mortality at young and old ages.This study takes this dependency into account when modeling the joint distribution of remaining life expectancy between the parties. The joint distribution of remaining lifetime between annuitants is modeled with a Vine’s copula constructed from the marginal distribution of each annuitant. This research also takes account the actuarial margin rate using BI-7-day (reverse) repo rate data estimated with fuzzy sets. The annuity benefits calculation is assumed with some Kendall's tau () values. The result shows the value of annuity benefits increases as the value of increases.

Why do we postpone annuity purchases?

This paper seeks to explain why annuity purchases are postponed to a later age. We consider an overlapping generations model with uncertain lifetime and two types of annuities. It is shown that, if the economy is dynamically inefficient, individuals demand annuities without delay. However, if it is efficient, annuity purchases are postponed. We also show that these results are robust to several extensions.

Accelerating the premiums for annuities, life annuities and life insurance

Since it is well-known that it is inevitable to avoid the risks and changes in personal earnings, the types of annuities, life annuities, life insurance and their payment types are important for individuals, customers and financial institutions. In this study the types of annuities, life annuities and life insurance are discussed and some original payment models have been proposed considering both the annuity-due and annuity-immediate situations in increasing and decreasing case of payments. These suggested payment models that have been proposed have brought innovation to the literature in terms of being original.

Navigating complex financial decisions at retirement: evidence from annuity choices in public sector pensions

AbstractChoices regarding the disposition of wealth at retirement can have substantial implications for retirement income security. We analyze the factors determining annuity payout option choices within the context of a public sector defined pension plan with no default annuity option. Using combined administrative records and survey data, we explore the role of individual and household characteristics as well as risk preferences, time preferences, and financial literacy. We also document retiree well-being and satisfaction with retirement decision making. The evidence is consistent with predictions over which households might benefit most from each annuity option. Comparing retirees who chose different types of annuities, we find that these groups of retirees report very different levels of well-being in retirement. All retirees report lower levels of retirement income security over time, with strong differences among those who chose different types of annuities.

Economic performance of uneven-aged forests analysed with annuities

For this study, 18 permanent research plots in Switzerland with an area between 0.5 and 2.5 ha that have been installed between 1905 and 1931 were analysed using annuities. The plots cover a wide range of uneven-aged forest-types from pure Norway spruce to classical single-tree selection (plenter) forests dominated by Silver fir in different elevations (575–1810 m a.s.l). The areas have been managed according to an uneven-aged silvicultural system and growth and yield characteristics have been assessed on a single-tree basis every 5–11 years. Net revenues of timber harvesting were computed as a time series from the installation of the plots until today and transformed into net present values and subsequently into annuities for each assessment interval. Three types of annuities: (1) for cutting cycles; (2) forward; (3) backward for the whole assessment period were calculated together with internal rates of return. The results display that annuities were usually positive with an interest of 2 per cent. High elevation (>1400 m) Norway spruce dominated forests as well as heavily overstocked (>900–1000 m3 ha−1) plots showed the lowest or even negative annuities. The reduction of overstocks lead in the mid-term to an increase, but resulted in a short-term decrease of the annuities. For many of the research plots, especially those in higher elevations, there is a trend towards an increase of the annuities over time. The highest annuities were found in Silver fir dominated selection forests with a growing stock close to or slightly above an equilibrium structure. The backward calculation of the annuities improved for some plots the problem of the strong influence of the value of the initial growing stock. Implications for uneven-aged silviculture as well as for the analysis of the economic performance of uneven-aged and even-aged forests and the application of annuities are discussed in the paper.

Optimal Annuity Risk Management*

We study the optimal consumption and portfolio choice problem over an individual’s life-cycle taking into account annuity risk at retirement. Optimally, the investor allocates wealth at retirement to nominal, inflation-linked, and variable annuities and conditions this choice on the state of the economy. We also consider the case in which there are, either for behavioral or institutional reasons, limitations in the types of annuities that are available at retirement. We allow for the possibility of a government-provided annuity income. Subsequently, we determine how the investor optimally anticipates annuitization before retirement. We find that (i) using information on both term structure variables and risk premia significantly improves the annuity choice, (ii) annuity market incompleteness is economically costly, and (iii) adjustments in the optimal investment strategy before retirement induced by the annuity demand due to inflation risk and time-varying risk premia are significant in economic terms. This latter result holds as well for sub-optimal annuity choices. The adjustment to hedge real interest rate risk is negligible.

Valuing medieval annuities: Were corrodies underpriced?

Medieval bishops condemned and restricted the sale of corrodies (a type of annuity), partly on the grounds of their perceived unprofitability. The available data on the profitability of corrodies is limited and little analysed, and the episcopal condemnation of corrodies has been adopted by modern researchers. After recognising the difficulties, this paper applies an annuity pricing model to study corrody pricing. Given various assumptions, contrary to the established view, it is argued that the sale of corrodies was financially profitable for institutions. Finally, some reasons are considered for the negative attitude of contemporary and historical opinion towards the sale of corrodies.

Valuing Medieval Annuities: Were Corrodies Underpriced?

Medieval bishops condemned and restricted the sale of corrodies (a type of annuity), partly on the grounds of their perceived unprofitability. The available data on the profitability of corrodies is limited and little analysed, and the episcopal condemnation of corrodies has been adopted by modern researchers. After recognising the difficulties, this paper applies an annuity pricing model to study corrody pricing. Given various assumptions, contrary to the established view, it is shown that the sale of corrodies was profitable for institutions. Finally, some reasons are considered for the negative attitude of medieval bishops towards the sale of corrodies.

Longevity Annuity: An Annuity for Everyone?

As of 2005, individuals had an estimated $7.4 trillion invested in IRAs and employer-sponsored retirement accounts. Given these investments, many retirees will face the difficult problem of turning a pool of assets into a stream of retirement income. Purchasing an immediate annuity is a common recommendation for retirees looking to maximize retirement spending. However, the vast majority of retirees are unwilling to annuitize all of their assets. This paper demonstrates that a new type of annuity, a longevity annuity, is optimal for retirees unwilling to fully annuitize. For a typical retiree, allocating 10%-15% of wealth to a longevity annuity creates spending benefits comparable to an immediate annuity allocation of 60% or more.

Optimal Annuity Risk Management

We study the optimal consumption and portfolio choice problem over an individual's life-cycle taking into account annuity risk at retirement. Optimally, the investor allocates wealth at retirement to nominal, inflation-linked, and variable annuities and conditions this choice on the state of the economy. We also consider the case in which there are, either for behavioral or institutional reasons, limitations in the types of annuities that are available at retirement. We allow for the possibility of a government-provided annuity income. Subsequently, we determine how the investor optimally anticipates annuitization before retirement. We find that (i) using information on both term structure variables and risk premia significantly improves the annuity choice, (ii) annuity market incompleteness is economically costly, and (iii) adjustments in the optimal investment strategy before retirement induced by the annuity demand due to inflation risk and time-varying risk premia are significant in economic terms. This latter result holds as well for sub-optimal annuity choices. The adjustment to hedge real interest rate risk is negligible.

Wireless investor - The false allure of equity indexed annuities

The purpose of this column is to explain the undesirable features of annuities in general and of equity indexed annuities in particular. The types of annuities, a contract between a purchaser and an insurance company, are discussed.

The Economics of Annuities

The challenges of an ageing global population are among the most pressing on the public policy agenda. However, in looking at issues around retirement income, the emphasis has largely been on the accumulation phase: saving for retirement. So far, rather less attention has been paid to the decumulation phase: turning the pot of savings into an income stream. However, as more and more people approach retirement, this becomes the key issue for them. There are potentially significant risks for the consumer in converting savings into income, the most pressing being to ensure they do not outlive their savings. Insurance companies therefore have a key role to play in this, in providing annuities. An annuity is a product which is designed to give the purchaser, the annuitant, an income for life, however long or short that is. It is the only financial contract that provides an income for life. Thus, for a single payment, it insures the purchaser against outliving his assets. However, the opportunities presented by this market are not without their risks. This article will begin by considering the demand for annuities, in part by looking at the U.K. experience. Last year, the Association of British Insurers carried out research into the characteristics of annuitants in the U.K. So, drawing on this, I will explore some of the drivers of demand now and in the future; what informs the decision to buy an annuity; the characteristics of annuitants in the U.K.; and what the risks are for the purchaser. Then the article will examine issues around the supply of annuities, including who provides annuities; what types of annuities there are; how they are funded; what drives profitability; and what the risks to the annuity provider are. This leads into issues of price and, in particular, whether annuities are seen as providing value for money and, indeed, how that might be measured.

An Analysis of Premium Tax Revenue and Rate in California: The Case of Structured Settlement Annuities

In recent years the use of single annuities in order to fund payments for structured settlements in personal injury cases has grown rapidly. The basic mechanism is for defendants (or their insurers) who experience adverse verdicts or settlements requiring periodic payments to purchase an annuity with promised payments that match those for which they are liable. This arrangement permits the satisfaction of the defendants' obligation on a lump sum basis and at the same time permits the receipt of a periodic compensation stream by the victim. Indeed, in such cases annuities and annuity carriers play precisely the role for which annuities were designed and in which annuity carriers have the required expertise. Laws governing the rates of tax on periodic structured settlement annuities have, because of the surge in demand in this market, become an issue of great interest to insurers. This type of annuity is classified as non-qualified and subject to taxation at varying rates in the states of Alabama, California, District of Columbia, Iowa, Kansas, Kentucky, Maine, Mississippi, Missouri, Nebraska, Nevada, North Carolina, South Dakota, Tennessee, West Virginia and Wyoming. In addition, premiums written by insurers domiciled in these states and reported in states that do not normally collect on structured settlement annuities but do have retaliatory tax provisions are subject to premium taxes on a retaliatory basis. While it may be argued that taxation of structured settlement annuities should be eliminated altogether, from a more practical perspective in these budget conscious times, there is a concern for revenue loss in those states that currently receive from sales of such annuities if the