Working Paper 21/02 ANNUITIES FOR AN AGEING WORLD

Substantial research attention has been devoted to the pension accumulation process, whereby employees and those advising them work to accumulate funds for retirement. Until recently, less analysis has been devoted to the pension decumulation process – the process by which retirees finance their consumption during retirement. This gap has recently begun to be filled by an active group of researchers examining key aspects of the pension payout market. One of the areas of most interesting investigation has been in the area of annuities, which are financial products intended to cover the risk of retirees outliving their assets. This paper reviews and extends recent research examining the role of annuities in helping finance retirement consumption. We also examine key market and regulatory factors. Olivia S. Mitchell (corresponding author) International Foundation of Employee Benefit Plans Professor of Insurance and Risk Management Executive Director, Pension Research Council The Wharton School, University of Pennsylvania 3641 Locust Walk, 307 CPC Philadelphia PA 19104-6218 T: 215/746-5706 F: 215/898-0310 Email: [email protected] David McCarthy Department of Insurance and Risk Management The Wharton School, University of Pennsylvania 3641 Locust Walk, 307 CPC Philadelphia PA 19104-6218