OECD - Life Annuity Products and Their Guarantees

This publication presents the work of the OECD project on annuity products and their guarantees. The project seeks to better understand the types of products available, the guarantees that they offer, and how policy can support the role of these products in financing retirement.

The first chapter describes the criteria that define the scope of the discussion around annuity products for retirement. It provides a classification of the different types of annuity products in order to establish a common language with which to discuss annuity products and markets. The second chapter provides an overview of the specific types of annuity products available, as well as the markets in which they can be found. The third chapter focuses on the risks that these products present to annuity providers and how they are managed, describing product features and risk management strategies for each product in depth. The fourth chapter discusses some considerations relating to drivers of annuity product design, availability, and sustainability as well as the potential role of regulation, relying on examples found in various markets to guide the discussion. The fifth chapter considers consumer protection issues relating to annuity products, in particular how these products are communicated and distributed to individuals. discusses the challenges that policy makers face in incorporating annuity products into the retirement landscape and presents the key policy considerations with respect to the issues raised.

The project on annuity products and their guarantees is part of the research and policy programme of work of the OECD Insurance and Private Pension Committee (IPPC) and, in particular, its Working Party on Private Pensions (WPPP). The WPPP is an international body that brings together policy makers, regulators and the private sector from all OECD countries to discuss issues related to the operation and regulation of funded retirement income systems.

This publication was prepared by Pablo Antolin and Jessica Mosher of the Financial Affairs Division of the OECD Directorate for Financial and Enterprise Affairs. It has greatly benefited from the comments of national government delegates of the IPPC and the WPPP, as well as representatives of industry bodies. We would especially like to thank Manuel Aguilera, previous Chair of the IPPC, and Ambrogio Rinaldi, Chair of the WPPP, for their useful advice, support and valuable inputs to this project. Editorial and communication support was provided by Pauline Arbel, Pamela Duffin, Kate Lancaster and Edward Smiley.

The OECD gratefully acknowledges the financial support from Prudential Financial to the OECD work on private pensions.