Longevity Insurance Annuities : Potential Role in Social Insurance

• Autorzy: John A. Turner , Gerard Hughes , Agnieszka Chłoń-Domińczak , David M. Rajnes
• Języki publikacji: EN

Abstrakty

EN

The aim of this study is to analyse longevity insurance annuities as a possible addition to social security programmes. The research method is to analyse the strengths and weaknesses of longevity insurance provided by the private sector and by government, and to survey and analyse examples of longevity insurance benefit programmes that countries have already established. Longevity insurance annuities are deferred annuities that start payment at an advanced age at which a substantial proportion of the birth cohort has died. In developed countries, that would mean that these annuities would start for people in their early eighties, but when social security programmes were started in many countries, the age at which longevity insurance annuities would begin was substantially younger. This study finds that originally, public pension programmes in a number of countries were structured as a longevity insurance programme, with roughly 50% of those entering the workforce surviving to receive the benefits because of relatively high benefit eligibility ages. Over time, however, as life expectancy has improved, the benefits these programmes provide have slowly transformed into benefits that most people entering the work force ultimately receive. This paper argues that reintroduction of a longevity insurance benefit as part of public pensions could be an important policy in particular because this benefit is generally not provided by the private sector. These annuities would benefit some older retirees, particularly in countries with modest public pension benefits, but the private sector has problems in providing them, particularly when they have to be provided on a unisex basis. A longevity insurance benefit is desirable in countries that rely on defined contribution pensions, where some workers take their benefits as phased withdrawals, and thus risk outliving their benefits if they live substantially longer than their life expectancy. This paper surveys countries that provide this type of benefit. The addition of these benefits to social security may be particularly desirable as part of a reform where other changes being made to maintain solvency are resulting in reduced generosity of benefits. (original abstract)

Słowa kluczowe

EN

Life expectancy; Annuities; Insurances

PL

Długość życia; Renty; Ubezpieczenia

• Czasopismo: Rozprawy Ubezpieczeniowe
• Rocznik: 2017
• Numer: nr 3(25)
• Strony: 3--21

Twórcy

autor

John A. Turner

• Pension Policy Center, Washington, USA

autor

Gerard Hughes

• Trinity College Dublin, Ireland

autor

Agnieszka Chłoń-Domińczak

• Warsaw School of Economics, Poland

autor

David M. Rajnes

• U.S. Social Security Administration, Washington, USA

Bibliografia

• Abraham K. G., Harris B. H., 2016, The market for longevity annuities, "Journal of Retirement", 3(4), pp.12-27, http://www.iijournals.com/doi/abs/10.3905/jor.2016.3.4.012?journalCode=jor.
• Blake D., Turner J. A., 2014, Longevity insurance annuities: Lessons from the United Kingdom, "Benefits Quarterly", 1, pp. 39-47.
• Börsch-Supan A. H., Wilke C. W., 2005, Reforming the German public pension system. http://www.rand.org/labor/aging/rsi/rsi_papers/2006_axel1.pdf.
• Capretta J. C., 2007, Global aging and the sustainability of public pension systems: an assessment of reform efforts in twelve developed countries. A Report of the Aging Vulnerability Index Project. Washington, DC: Center for Strategic & International Studies. http://csis.org/files/media/csis/pubs/pension_profile.pdf.
• Chen T., Hughes G., Turner J. A., 2016, Longevity insurance benefits for Social Security: International experience, "Benefits Quarterly", 32(2), pp. 43-53.
• Chen T., Turner J. A., 2015, Longevity insurance annuities: China adopts a benefit innovation from the past, "International Social Security Review", 68(2), pp. 27-41.
• Central Intelligence Agency (CIA), 2016, Country Comparison: Life Expectancy at Birth, "The World Factbook", https://www.cia.gov/library/publications/the-world-factbook/rankorder/2102rank.html.
• Dugan A., 2014, Retirement remains Americans' top financial worry. Gallup, April 22, 2014. http://www.gallup.com/poll/168626/retirement-remains-americans-top-financialworry.aspx.
• Expert Committee on the Future of the Québec Retirement System, 2013, Innovating for a sustainable retirement system: a social contract to strengthen the retirement security of all Québec workers, http://www.rrq.gouv.qc.ca/SiteCollectionDocuments/www.rrq.gouv.qc/Anglais/publications/rapport_comite/rapport.pdf.
• Ezra D., 2016, Most people need longevity insurance rather than an immediate annuity, "Financial Analysts Journal", 72(2), pp. 23-29, http://www.cfapubs.org/doi/pdf/10.2469/faj.v72.n2.3.
• Glover J. W., 1921, United States life tables: 1890, 1901, 1910, and 1901-1910, U.S. Bureau of the Census, U.S. Government Printing Office. http://www.cdc.gov/nchs/data/lifetables/life1890-1910.pdf.
• Harrysson L., Edebalk P. G., 2010, Employers and pension reform in Sweden from war to war, Lunds University Working Paper, 4, https://lucris.lub.lu.se/ws/files/3553576/1691648.
• Hindustan Times, 2017, Delhi Govt Increases Monthly Pension of Elderly, Widows and Disabled, January 6. http://www.hindustantimes.com/delhi/delhi-govt-increases-monthlypension-of-elderly-widows-and-disabled/story-GM5KeCQHxdBgk62EyQ5CfK.html.
• Horneff V., Maurer R., Mitchell O. S., 2016. Putting the pension back in 401(k) plans: Optimal versus default longevity income annuities, SAFE Working Paper 150, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2853430.
• Hughes G., Turner J. A., 2015. Demographic change and longevity insurance benefits for public pension reform [in:] Szczepański M. (Ed.), Demographic Change and Public Pensions, Poznań University Press, Poznań.
• Ireland, 1972, Financial Statement, Budget 1972. http://oireachtasdebates.oireachtas.ie/debates%20authoring/debateswebpack.nsf/takes/dail1972041900020?opendocument.
• Iwry J. M., Turner J. A., 2009, Automatic annuitization: New behavioral strategies for expanding lifetime income in 401(k)s [in:] Gale W.G., Iwry J. M., John D.C., Walker L. (Eds.), Automatic: Changing the Way America Saves, Washington, DC: Brookings Institution Press, pp. 151-172.
• Long T. L., 2011, Viet Nam: Pension system overview and reform directions, [in:] Park D. (Ed.), Pension Systems and Old-Age Income Support in East and Southeast Asia: Overview and reform directions, Metro Manila, Philippines: Asian Development Bank, pp. 203-221.
• Milevsky M. A, 2005, Real longevity insurance with a deductible: Introduction to advanced-life delayed annuities (ALDA), "North American Actuarial Journal", 9(4), pp. 109-122.
• New York Life, 2012, Comment letter on the proposed longevity annuity contract regulation.
• Organisation for Economic Co-operation and Development (OECD), 2016, Net pension replacement rates, https://data.oecd.org/pension/net-pension-replacement-rates.htm.
• Ortiz I., Schmitt V., Loveleen D. (Eds.), 2017, Social Protection Floors: Volume 1: Universal Schemes. International Labour Organisation, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2895420.
• Panis C. W. A., Brien M. J., 2016, Innovations and trends in annuities: Qualifying Longevity Annuity Contracts (QLACs), Advanced Analytical Consulting Group and Deloitte. October 24. https://www.dol.gov/sites/default/files/ebsa/researchers/analysis/retirement/innovations-and-trends-in-annuities.pdf.
• People's News, 2012, Nine million people age 80 and older receiving Old Age Allowance in China, http://politics.people.com.cn/n/2012/0808/c1001-18693477-1.html.
• Rebela M., 2016, Zanzibar pension scheme timely for poor elderly, The Citizen (November 23), http://www.thecitizen.co.tz/News/Zanzibar-pension-scheme-timely-for-poor-elderly-VIDEO-/1840340-3460922-t823emz/index.html.
• Redmond P., 2015, Spending on medication increases with age, http://www.publicpolicy.ie/spending-on-medication-increases-with-age/.
• Ronda, R. A., 2015, DSWD wants bigger budget for indigent seniors' pension, The Philippine Star, updated September 30.
• Russell H., Maitre B., Nolan B., 2010. Monitoring poverty trends in Ireland 2004-2007: Key Issues for Children, People of Working Age and Older People, Dublin: Economic and Social Research Institute, Research Series 17. https://www.esri.ie/news/monitoring-povertytrends-in-ireland-2004-2007/
• Samson M., 2012, Nepal's Senior Citizens' Allowance: a Model of Universalism in a Low-Income Country Context, [in:] Handayani S.W., Babajanian B. (Eds.), Social Protection for Older Persons: Social Pensions in Asia, Mandaluyong City, Philippines: Asian Development Bank, 2012, pp. 214-246.
• Scott J. S., Watson J. G., Hu W. Y., 2007, Efficient annuitization: Optimal strategies for hedging mortality risk. Pension Research Council Working Paper 2007-09.
• Szatur-Jaworska B., 2008, Bezpieczeństwo socjalne - wybrane pieniężne świadczenia społeczne. [Social safety - selected cash social benefits] [in:] Szatur-Jaworska B. (Ed.) Stan przestrzegania praw osób starszych w Polsce. Analiza i rekomendacje działań. [The status of respecting the rights of the older people in Poland. Analysis and recommendations for actions] Biuletyn RPO Materiały 65, Warszawa.
• Tergesen, A., 2012, How to create a pension (with a few catches), Personal Finance, Wall Street Journal, April 9. http://www.wsj.com/articles/SB10001424052970204571404577253853314354494
• Turner J. A., 2013, Providing longevity insurance annuities: a comparison of the private sector versus Social Security, "The Journal of Retirement", 1(2), pp. 125-131, http://www.iijournals.com/doi/abs/10.3905/jor.2013.1.2.125.
• Turner J. A., Hughes G., Chłoń-Domińczak A. Rajnes, D. M., 2017, Improving Pension Income and Reducing Poverty at Advanced Older Ages: Longevity Insurance Benefits in Ireland and Poland as Models for the United States, "The Journal of Retirement" (forthcoming).
• U.K. Office for National Statistics, 2015, English Life Tables No. 17, 2010-2012. Statistical Bulletin, September 1. http://www.ons.gov.uk/ons/rel/lifetables/decennial-life-tables/english-life-tables--no-17--2010-12/stb-elt17.html.
• U.S. Department of the Treasury, 2012, Longevity Annuity Contracts, Federal Register 77