Abstract and Keywords
This article summarizes the current operation of annuity markets and the potential role of these markets in providing retirement security. It is divided into six sections. The first describes the basic structure of annuity products, with particular reference to those that are currently available in the United States and the United Kingdom. The second section explains the standard analysis of why annuities are attractive to individuals who face uncertainty about length of life, and describes several hypotheses that have been advanced to explain the limited size of private annuity markets. The third section describes the standard methodology for comparing the expected present value of annuity payouts with their cost. The fourth section examines several aspects of individual demand for annuity products. The fifth section briefly discusses the role of regulation in annuity markets. The brief conclusion considers a number of emerging issues that bear on the role of private annuity markets in providing retirement-income security.
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