Enhanced annuities as a complement to the public retirement pension: analysis of their implementation in Spain

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Published: 12-11-2020

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Jorge de Andrés Sánchez
Universitat Rovira i Virgili – Social & Business Research Laboratory, Càtedra d’Inclusió Social
Spain
https://orcid.org/0000-0002-7715-779X
Laura González-Vila Puchades
Universitat de Barcelona – Departament de Matemàtica Econòmica, Financera i Actuarial
Spain
https://orcid.org/0000-0003-4824-5894
Vol 29 No 3 (2020), Articles, pages 1-19
DOI: https://doi.org/10.15304/rge.29.3.6649
Submitted: 04-03-2020 Accepted: 20-09-2020 Published: 12-11-2020
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Abstract

Enhanced annuities are non-deferred annuities that, by considering risk factors of the insured person in addition to their age, can provide a greater periodic pay-out than that of standard annuities. Given current demographic trends and the associated longevity risk, enhanced annuities, widely introduced in the United Kingdom, can become an important market niche in countries where their sale levels are low or non-existing, as is the case of Spain. In this work, we describe some key aspects of enhanced annuities. A quantitative analysis is also carried out. To do so, we focus on determining the pay-outs to be received, based on the consideration of a mortality table fitted to the annuitant’s life expectancy. Finally, the main drivers of and barriers to the demand and supply of this product are exposed, considering the particular situation of Spain.

Keywords:

Life annuities, Enhanced annuities, Life expectancy, Longevity risk, Mortality multiplier
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References

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