ANNUITIES IN COMPARATIVE PERSPECTIVE: DO CUSTOMERS GET THEIR MONEY’S WORTH?

Web site at www.oecd.org/daf/insurance-pensions / The Compendium brings together a wide range of policy issues, comparative surveys and reports on insurance and private pensions activities. Book 1 deals with insurance issues and Book 2 is devoted to Private Pensions. The Compendium seeks to facilitate an exchange of experience on market developments and promote "best practices " in the regulation and supervision of insurance and private pensions activities in emerging economies. The views expressed in these documents do not necessarily reflect those of the OECD, or the governments of its Members or non-Member economies. 2Annuities Markets in Comparative Perspective: Do Consumers Get Their Money’s Worth? Pension reforms normally focus on the accumulation phase, plus term insurance that provides annuities for the disabled and for dependent survivors, all of which are immediate concerns.1 Decumulation of the capital in workers ’ retirement savings accounts appears to be far off in the future. But in the second generation of reforms, countries have begun to pay attention to eventual decumulation, either through gradual withdrawals or through annuitization which provides longevity insurance. At this point, it becomes important to learn whether annuities markets exist and how they operate. We have undertaken a project that attempts to analyze annuities markets around the world. We are particularly interested in understanding whether these markets can be relied on to provide reliable retirement income at reasonable prices and what kinds of market failure can be anticipated. One way to approach this question is to explore whether the expected pay-outs and the “money’s worth ratio ” differ across countries, if so why and what light we could throw on the existence and size of adverse selection. In this paper we present some preliminary results.