Annuity Pricing in Public Pension Plans: Importance of Interest Rates

39 Pages Posted: 11 Dec 2018

See all articles by Nino Abashidze

Nino Abashidze

North Carolina State University

Robert L. Clark

North Carolina State University - Poole College of Management

Beth Ritter

North Carolina State University

David Vanderweide

North Carolina General Assembly - Fiscal Research Division

Date Written: December 2018

Abstract

There is little systematic information on the distribution options in public sector retirement plans and how annuity options are priced relative to the standard single life annuity. This study examines the distribution options of 85 large public retirement plans covering general state employees, teachers, and local government employees. An important component of the analysis is the construction of a data set presenting the annuity options offered by each of these plans and how the monthly benefits for these distribution options are priced. The analysis shows that interest rates used to price annuities vary considerably across the plans. As a result, retirees with the same monthly benefit if a single life benefit is chosen will have substantially different monthly benefits if they select the joint and survivor annuity offered by their retirement plan.

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Suggested Citation

Abashidze, Nino and Clark, Robert L. and Ritter, Beth and Vanderweide, David, Annuity Pricing in Public Pension Plans: Importance of Interest Rates (December 2018). NBER Working Paper No. w25343. Available at SSRN: https://ssrn.com/abstract=3298818

Nino Abashidze (Contact Author)

North Carolina State University

Hillsborough Street
Raleigh, NC 27695
United States

Robert L. Clark

North Carolina State University - Poole College of Management ( email )

Hillsborough Street
Raleigh, NC 27695-8614
United States
919-515-5560 (Phone)
919-515-5564 (Fax)

Beth Ritter

North Carolina State University

Hillsborough Street
Raleigh, NC 27695
United States

David Vanderweide

North Carolina General Assembly - Fiscal Research Division ( email )

301 N Salisbury St.
Raleigh, NC 27601
United States

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