A Summary and Update of Developing Annuities Markets : The Experience of Chile

The rapid growth of the market for retirement products in Chile has its origins in the pension reform that was implemented in 1981. But the successful development of an active annuity market also reflects many other factors. This paper summarizes a...

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Bibliographic Details
Main Authors:	Rocha, Roberto, Rudolph, Heinz P.
Format:	Policy Research Working Paper
Language:	English
Published:	2012
Subjects:	ACCOUNTING ANNUITIES MARKETS ANNUITY ANNUITY MARKET ANNUITY PAYMENT ANNUITY PROVIDERS ANNUITY RATE ANNUITY RATES ASSET MANAGEMENT ASSET MANAGERS BALANCE SHEET BALANCE SHEETS BANK BONDS BANKRUPTCY BANKRUPTCY RISK BANKRUPTCY RISKS BARRIER TO ENTRY BASIS POINTS BENEFICIARIES BENEFICIARY BENEFIT FORMULA BENEFIT PAYMENTS BEQUEST BEQUESTS BIDDING PROCESS BOND BOND FUNDS BOND PORTFOLIOS BROKER BROKERS CAPITAL ADEQUACY CAPITAL MARKET CAPITAL MARKETS DEVELOPMENT CAPITAL REQUIREMENT CASH FLOWS CENTRAL BANK COMPETITIVE MARKET CONTINGENT LIABILITY CONTRIBUTION RATES CORPORATE BOND CORPORATE BONDS CREDIT ENHANCEMENT CREDIT RISK CREDIT STANDINGS DEBT DEBT INSTRUMENTS DEFAULTS DEFERRED ANNUITIES DEFERRED ANNUITY DEFINED BENEFIT DEFINED-CONTRIBUTION PENSION DEPOSITS DERIVATIVES DISABILITY PENSION DISABILITY PENSIONS DIVERSIFIED PORTFOLIO EARLY RETIREMENT PENSIONS ELDERLY ELECTRONIC PAYMENT SYSTEMS EQUITY FUNDS EXCHANGE RATE FINANCIAL CRISES FINANCIAL CRISIS FINANCIAL INSTITUTIONS FINANCIAL INSTRUMENTS FINANCIAL MARKETS FIXED ANNUITIES FIXED INCOME FIXED INCOME PORTFOLIO FOREIGN INVESTMENTS FREE BONDS GLOBAL CAPITAL GLOBAL CAPITAL MARKETS GOVERNMENT BONDS GOVERNMENT GUARANTEES GUARANTEED PERIOD HOUSING FINANCE INCOME INSTRUMENTS INCOME LEVELS INCOME STREAMS INDEXED ANNUITIES INDIVIDUAL ACCOUNT INFLATION INFLATION RISK INFLATION RISKS INSTRUMENT INSURANCE INSURANCE COMPANIES INSURANCE COMPANY INSURANCE MARKET INSURANCE PREMIUM INSURANCE PREMIUMS INTEREST RATE INTERMEDIATION SPREAD INTERMEDIATION SPREADS INTERNAL RATE OF RETURN INTERNAL RATES OF RETURN INTERNATIONAL BANK INTERNATIONAL STANDARDS INVESTING INVESTMENT FUNDS INVESTMENT HORIZON INVESTMENT RATE INVESTMENT RETURN INVESTMENT RETURNS INVESTMENT RISK JOINT ANNUITIES LABOR FORCE LABOR INCOME LABOR MARKET LEVEL OF INTEREST RATES LEVIES LEVY LIFE ANNUITIES LIFE EXPECTANCY LIFE INSURANCE LIFE INSURANCE COMPANIES LIFE INSURANCE PREMIUMS LIQUID INSTRUMENTS LIQUIDITY LIQUIDITY PREMIUM LONG-TERM ASSETS LONGEVITY INSURANCE LONGEVITY RISK LONGEVITY RISKS LUMP SUM WITHDRAWALS MANDATORY COVERAGE MANDATORY SAVINGS MARK-TO-MARKET MARKET CONCENTRATION MARKET CONDITIONS MARKET INTEREST RATES MARKET SHARE MARKET VALUES MATURITIES MATURITY MORAL HAZARD MORTALITY MORTALITY TABLE MORTGAGE MORTGAGE BOND MORTGAGE BONDS MORTGAGE-BACKED SECURITIES MUTUAL FUNDS NORMAL RETIREMENT AGE OBLIGATORY RESERVE PENSION PENSION ACCOUNTS PENSION ASSETS PENSION FUND PENSION FUND ADMINISTRATORS PENSION FUND ASSETS PENSION FUND MEMBERS PENSION FUNDS PENSION FUNDS INSURANCE PENSION INSURANCE PENSION LAW PENSION REFORM PENSION REFORMS PENSION SECTOR PENSION SYSTEM PENSION SYSTEMS PENSIONERS PENSIONS PILLAR BENEFIT PORTFOLIO PORTFOLIOS PREPAYMENT PREPAYMENT RISKS PRIVATE EQUITY PRIVATE PENSION PRIVATE PENSION FUNDS PRIVATE PENSION SYSTEMS PRIVATE PLACEMENTS PROFIT MARGINS PRUDENTIAL REGULATION PUBLIC MARKETS PUBLIC PENSION PUBLIC PILLAR QUOTATION SYSTEM RATES OF INTEREST RATES OF RETURN REAL INTEREST REAL INTEREST RATES REGULAR PAYMENTS REGULATORY FRAMEWORK REINVESTMENT REINVESTMENT RATE REPLACEMENT RATES RESERVE RESERVES RETIREE RETIREES RETIREMENT RETIREMENT AGE RETIREMENT BENEFITS RETIREMENT INCOME RETIREMENT PHASE RETIREMENT PRODUCT RETIREMENT PRODUCTS RETIREMENT SYSTEM RETIRING WORKERS RETURN RETURNS RETURNS ON EQUITY RISK MANAGEMENT RISK POOLING RISK PREMIUMS RISK PROFILES RISK SHARING RISK-FREE RATE SHARE OF EQUITIES STATE GUARANTEES SUPERVISORY AGENCY SURVIVOR PENSIONS TAX TRANSPARENCY TREASURY TREASURY BONDS TURNOVER VALUATION VALUE OF ASSETS VARIABLE ANNUITIES WAGE GROWTH WITHDRAWAL YIELD CURVE
Online Access:	http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20100601090117 http://hdl.handle.net/10986/3811

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Summary:	The rapid growth of the market for retirement products in Chile has its origins in the pension reform that was implemented in 1981. But the successful development of an active annuity market also reflects many other factors. This paper summarizes and updates an earlier longer study on the development of the Chilean annuity market. The update focuses on the numerous changes that were introduced in 2008. The most striking aspect of the Chilean experience is the very high rate of annuitization. This has been linked to the restrictions that have been applied to lump-sum withdrawals, the offer of inflation-protected annuities, and the robust prudential regulation of providers. But the level of annuitization has also been supported by the annuitization incentives provided to early retirees and the influence of brokers and sales agents. The recent regulatory changes have weakened the impact of the last two factors, while strengthening the demand for annuities at normal retirement.

A Summary and Update of Developing Annuities Markets : The Experience of Chile

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