Macro longevity risk and the choice between annuity products: Evidence from Denmark

Anne G. Balter, Malene Kallestrup-Lamb and Jesper Rangvid

Insurance: Mathematics and Economics, 2021, vol. 99, issue C, 355-362

Abstract: We study a unique data-set containing individuals who were given the opportunity to substitute a guaranteed pension product with relatively low levels of risk for a market-sensitive pension product with both a higher degree of financial risk and exposure to macro longevity risk. Implicitly there is a longevity hedge built into the guaranteed product that is abolished when one switches to the market-sensitive product. The analysis shows that situations might arise where expected pension payments in the market-sensitive product fall below expected pension payments in the guaranteed product, despite the fact that the former has a higher expected return from financial assets. We find that young male residents of Copenhagen with a degree in economics who are guaranteed a low return on their pension savings and have moderate pension wealth are more likely to switch to the market-sensitive pension product.

Keywords: Macro longevity risk; Variable annuities; Defined contributions; Pension reform; Empirical decision making (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0167668721000809
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:insuma:v:99:y:2021:i:c:p:355-362

DOI: 10.1016/j.insmatheco.2021.04.009

Access Statistics for this article

Insurance: Mathematics and Economics is currently edited by R. Kaas, Hansjoerg Albrecher, M. J. Goovaerts and E. S. W. Shiu

More articles in Insurance: Mathematics and Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().