Do Not Pay for Your Interest Guarantee! The Law of the Triple Blow

Guillén, Montserrat, Agnieszka Karolina Konicz, Jens Perch Nielsen, and Ana M. Perez-Marın. 2013. “Do Not Pay For a Danish Interest Guarantee. The Law of the Triple Blow”. Annals of Actuarial Science 7 (2): 192-209. doi:10.1017/S1748499512000176.

13 Pages Posted: 20 Dec 2010 Last revised: 19 Apr 2014

See all articles by Montserrat Guillen

Montserrat Guillen

Agnieszka K. Konicz Bell

Independent

Jens Perch Nielsen

City University London - Cass Business School

Ana Maria Perez-Marin

University of Barcelona

Date Written: December 20, 2010

Abstract

We investigate the performance of pension schemes of with profit policies containing a guaranteed minimum rate of return. We use some simple assumptions and we compare them with a trivial strategy that keeps the percentage of investments in stocks constant along the duration of the contract and which is equivalent in terms of a risk measure. Using a Monte Carlo simulation we conclude that those with profit policies do not perform better than a trivial strategy and that they may perform worse if the pension company charges a risk premium.

Keywords: Retirement Wealth, Pension Industry, Pension Performance Measurement, Saving Schemes

Suggested Citation

Guillen, Montserrat and Konicz Bell, Agnieszka K. and Nielsen, Jens Perch and Perez-Marin, Ana Maria, Do Not Pay for Your Interest Guarantee! The Law of the Triple Blow (December 20, 2010). Guillén, Montserrat, Agnieszka Karolina Konicz, Jens Perch Nielsen, and Ana M. Perez-Marın. 2013. “Do Not Pay For a Danish Interest Guarantee. The Law of the Triple Blow”. Annals of Actuarial Science 7 (2): 192-209. doi:10.1017/S1748499512000176., Available at SSRN: https://ssrn.com/abstract=1728799 or http://dx.doi.org/10.2139/ssrn.1728799

Jens Perch Nielsen

City University London - Cass Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom

Ana Maria Perez-Marin

University of Barcelona ( email )

Gran Via de les Corts Catalanes, 585
Barcelona, 08007
Spain

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