In this paper we consider the risk-return tradeoff for variable annuities, focusing on defined contribution retirement facilities in the Dutch institutional setting. In particular, we study the effect of the assumed interest rate. We also consider in detail the consequences of the possibility to smooth financial market shocks over the remaining retirement period. Our analysis is based on an explicit distribution of initial pension wealth over the pension payments at various horizons. We briefly discuss the effects of sharing micro longevity risk.
|Place of Publication||Tilburg|
|Publication status||Published - 2017|
|Name||NETSPAR Design Paper|
Balter, A., & Werker, B. (2017). The Effect of the Assumed Interest Rate and Smoothing on Variable Annuities 2. (NETSPAR Design Paper; Vol. 81). NETSPAR. https://www.netspar.nl/en/publication/the-effect-the-assumed-interest-rate-and-smoothing-on-variable-annuities/