Annuity Values in Defined Contribution Retirement Systems: The Case of Singapore and Australia

31 Pages Posted: 19 Jan 2001 Last revised: 20 Oct 2010

See all articles by Suzanne Doyle

Suzanne Doyle

AMP Financial Services

Olivia S. Mitchell

University of Pennsylvania - The Wharton School; National Bureau of Economic Research (NBER)

John Piggott

University of New South Wales (UNSW) - Australian School of Business, School of Economics

Date Written: January 2001

Abstract

In this paper we derive and compare the value of life annuity products in an international context. Our specific goal is to assess the money's worth and adverse selection impact of annuities in two countries Singapore and Australia that have mandatory DC-type retirement plans. This similarity in plan type is offset by differences in the two countries' national retirement policies. Our comparison therefore exploits the natural experiment in annuity pricing and purchase behaviour under alternative retirement regimes. The results show that after controlling on administrative loadings, there appear to be important differences in measured adverse selection across countries. Specifically, selection appears to be far stronger in the presence of a generous public benefit scheme that provides a first line of defence against the risk of old-age poverty.

Suggested Citation

Doyle, Suzanne and Mitchell, Olivia S. and Piggott, John, Annuity Values in Defined Contribution Retirement Systems: The Case of Singapore and Australia (January 2001). NBER Working Paper No. w8091. Available at SSRN: https://ssrn.com/abstract=256915

Suzanne Doyle (Contact Author)

AMP Financial Services ( email )

Australia
02 9257 9187 (Phone)
02 9257 6613 (Fax)

Olivia S. Mitchell

University of Pennsylvania - The Wharton School ( email )

Philadelphia, PA 19104-6365
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

John Piggott

University of New South Wales (UNSW) - Australian School of Business, School of Economics ( email )

High Street
Sydney, NSW 2052
Australia

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