Design of comprehensive income products for retirement using utility functions

26 Pages Posted: 1 Jan 2020 Last revised: 4 May 2020

See all articles by Geoff Warren

Geoff Warren

Australian National University (ANU) - Research School of Finance, Actuarial Studies and Statistics

Date Written: May 2, 2020

Abstract

An approach for designing a menu of comprehensive income products for retirement (CIPRs) is proposed and demonstrated. The approach entails for steps: defining and characterising member types based on selected attributes; specifying a utility function to capture the objectives and preferences of each member type; conducting analysis to identify and evaluate candidate investment and drawdown strategies, and hence select a product design; and communication to members. The latter uses attributes to describe the type of investor for which a product is designed, as well as setting out the key product features and the outcomes it may deliver.

Keywords: Retirement, pensions, portfolio construction, utility functions, investment products, behavioral

JEL Classification: D14, D81, D91, G11, G23

Suggested Citation

Warren, Geoffrey J., Design of comprehensive income products for retirement using utility functions (May 2, 2020). Available at SSRN: https://ssrn.com/abstract=3504313 or http://dx.doi.org/10.2139/ssrn.3504313

Geoffrey J. Warren (Contact Author)

Australian National University (ANU) - Research School of Finance, Actuarial Studies and Statistics ( email )

CBE Building 26C
Kingsley Sreet, Acton
Canberra, ACT 0200
Australia

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