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Annuities and Aggregate Mortality Uncertainty

Author

Listed:
  • Justin van de Ven

    (National Institute of Economic and Social Research)

  • Martin Weale

    (National Institute of Economic and Social Research)

Abstract
This paper explores the effect of aggregate mortality risk on thepricing of annuities. It uses a two-period model; in the second period people face a constant but intiially unknown risk of death. Old people can either carry the aggregat emortlaity risk for themselves or buy annuities which are sold by young people. A market-clearing price for such annuties is established. It is found that old people would, given the choice, decide to carry a considerable part of aggregate mortality risk for themselves.

Suggested Citation

  • Justin van de Ven & Martin Weale, 2007. "Annuities and Aggregate Mortality Uncertainty," WEF Working Papers 0027, ESRC World Economy and Finance Research Programme, Birkbeck, University of London.
    • Handle: RePEc:wef:wpaper:0027
    as

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    File URL: http://www.worldeconomyandfinance.org/working_papers_publications/working_paper_PDFs/WEF0027.pdf
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    References listed on IDEAS

    as
    1. James Banks & Richard Blundell, 2005. "Private pension arrangements and retirement in Britain," Fiscal Studies, Institute for Fiscal Studies, vol. 26(1), pages 35-53, March.
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    4. Blanchard, Olivier J, 1985. "Debt, Deficits, and Finite Horizons," Journal of Political Economy, University of Chicago Press, vol. 93(2), pages 223-247, April.
    5. Amy Finkelstein & James Poterba, 2002. "Selection Effects in the United Kingdom Individual Annuities Market," Economic Journal, Royal Economic Society, vol. 112(476), pages 28-50, January.
    Full references (including those not matched with items on IDEAS)

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