2021 journal article

Annuity pricing in public pension plans: importance of interest rates

JOURNAL OF PENSION ECONOMICS & FINANCE, 20(1), 27–48.

By: N. Abashidze n, R. Clark n, R. Hammond, B. Ritter n & D. Vanderweide

co-author countries: United States of America πŸ‡ΊπŸ‡Έ
author keywords: Joint & survivor annuities; pricing of annuities; public pension plans
Source: Web Of Science
Added: January 11, 2021

Abstract This study examines the distribution options of 85 large public retirement plans covering general state employees, teachers, and local government employees. The 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 a joint and survivor annuity. We examine the impact of variation in the pricing of annuity options using both cross-plan differences in interest rates and the change in the choice of annuity options in one plan after the price of options changes due to new assumed interest rates and mortality rates.