캐나다 밀레프스키 연금학 교수님이 지난달말 동경에서 열렸던 OECD회의 참가 후기를 남기셨습니다.

이 회의에서 교수님은 퇴직연금 등을 일시금이 아닌 연금으로 지급받는 것(소위 annuity puzzle 문제)이 얼마나 중요한지 강조하시고 연금지급을 확대하기 위한 아이디어(톤틴연금) 등을 발제하셨다고 참가자들로부터 들었습니다.

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출처 : https://www.linkedin.com/pulse/world-decumulation-moshe-arye-milevsky

A World of Decumulation

I recently spent a week in Tokyo, where among other engagements I was attending and speaking at an OECD-sponsored conference on insurance in Asia. Although the theme of the conference was quite broad and included discussions of cyber-security as well as climate-change and insurance, a full day was devoted to pensions and decumulation (a.k.a. drawdown strategies.)

The slides and presentations are here

The OECD which is based in Paris has been working on developing guidelines or best practices for global retirement income systems, which they are hoping will be adopted by the 35-member countries as well as outsiders who would like to join the exclusive OECD club. Needless to say, the OECD is nudging anyone who will listen away from unfunded Defined Benefit (DB) systems towards funded (DC-type) plans. This is not uncontroversial, mind you.

In addition to the formal conference keynotes and presentations -- very formal, it’s Japan after all – over the long breaks I had the opportunity to chat with government officials from Myanmar, Estonia, Indonesia, Thailand, Cambodia, Singapore and Dubai (and other places I would never dare visit.) Think of it as the United Nations of insurance and pension regulators, all in a safe conference room.

Over the course of two days I learned many new financial factoids which I'm not quite sure where to store in memory – for example, insurance sales in the Greater Mekong Sub-region are increasing by over 100% per year – and I collected many business cards, which by the way is still done in that part of the world. I also learned how to bow, which I really like.

On a more relevant note – listening to representatives from both industry and government – I was struck by the following: 

1.) Retirement income is truly a global concern and there is a growing awareness that financial literacy and education must go hand-in-hand with any product solutions. A perfect system is useless if consumers don’t understand it and appreciate it. People vote for things they understand.

2.) Many countries and regulators are still looking to the U.S. financial services sector and their companies for solutions, mainly because of their experience and scale. The big U.S. company names you would recognize were all there.

3.) The unique and peculiar culture of different countries often makes it impossible to implement solutions that would seem quite logical to a (western trained) financial economist. When I would ask: “Why did you design that particular feature in that odd way?” the response was: “Otherwise, it would never sell.”

4.) Life annuities are very popular and used as the bedrock of retirement income in some countries (Singapore, and to a certain extent India) but are either non-existent (e.g. Cambodia, etc.) or extremely unpopular in others. The bequest motive is a very powerful factor in these countries. I pledge to add them to my simple life-cycle utility functions going forward!

Finally, for those of you interested in innovative retirement income products, in April of 2016 the Japanese insurance company Nippon Life launched a tontine-type annuity. Yes. Moreover, they actually use the word tontine front-and-center in the product description. They are very proud of the 17th century heritage of the idea, with no marketing fears or image concerns. The word tontine is (by now) known to a much larger segment of the population. But then again, the temple Manji symbol is also growing in popularity. Yikes!

출처 : http://squaredawayblog.bc.edu/squared-away/arcane-but-shrewd-retirement-solution/

April 12, 2018

Arcane but Shrewd Retirement Solution?

Hyacinthe Rigaud’s portrait of King Louis XIV, courtesy of the Getty Open Content Program

Tontines might be a nifty idea for retirement income. Too bad they haven’t been legal here for a century.

Tontine is a fancy word for betting on how long you’ll live – in a good way. Here’s the concept in a nutshell: many people pool their money in return for guaranteed regular payouts for life, similar to an annuity.

The people who live to, say 90, will receive ever-increasing financial payoffs, because the number of participants in the pool will invariably shrink over time.  The catch is that the investors who die young won’t receive as much income as the men and women who live the longest – but they won’t need the money either.

A new study by the Center for Retirement Research (CRR) takes a close look at an idea that is tossed around among finance experts: modifying tontines to use them as a source of retirement income.

Some criticize them as a dubious investment, but they’ve stood the test of time. King Louis XIV of France was the first monarch to raise public funds using tontines, a 1650s creation of Italian financier Lorenzo Tonti. More than a century later, they caused financial hardship among middle-class investors, laying some of the groundwork for the French Revolution.

Tontines made it into American popular culture in the M*A*S*H* television show. Because Col. Potter was the last man standing among his World War I Army buddies, he got the only remaining bottle of brandy from a cache they’d found and drank while camped out in a French chateau. Tontines popped up again in an episode of The Simpsons: grandpa Abe Simpson and Mr. Burns fight over some valuable German paintings in a tontine their Army unit had created back in World War II.

Credit for the idea of a retirement tontine goes to a paper by two professors at York University in Toronto, Moshe A. Milevsky and Thomas S. Salisbury. In his new report, CRR researcher Gal Wettstein agrees that tontines might be a useful way to get regular retirement income – with modifications.

Tontines’ big advantage is their guaranteed payouts to each investor. But a tontine costs less than annuities, because its investors – rather than an insurance company – bear the risk. A modified tontine for retirees would address their current downside: very old people get the largest payoffs, by default, as others in the pool die, but age and poor health can prevent some from fully enjoying the money. The modified retirement tontine could make equal, regular payments to all the participants over the years – rather than give the biggest payouts to those who live the longest – Wettstein said.

Milevsky and Salisbury have proposed ensuring the equal payments by basing them on the investor group’s overall survival probability. As investors die, Wettstein explains, the total number of fixed monthly payments would naturally decline, leaving enough funds in the pool to continue the equal payments. But the catch is that if everyone in the pool lives into their 90s – longer than average longevity predictions – lower payments would inevitably follow as the pool ran low.

Retirement tontines are still fanciful. But if they were legal, Wettstein wrote, they “would likely make the most sense as part of a larger portfolio.”

Squared Away writer Kim Blanton invites you to follow us on Twitter @SquaredAwayBC. To stay current on our blog, please join our free email list. You’ll receive just one email each week – with links to the two new posts for that week – when you sign up here.