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Price efficiency in the Dutch Annuity Market*


We provide the first analysis of annuity rates in the Netherlands for the period 2001–2012. During this period, the number of annuity providers was high and stable, and we find that falls in annuity rates can be explained entirely by changes in yields and life expectancy. We show that annuitants could have increased their annuity income by about 5%, by shopping around and purchasing their annuities from alternative providers. Money's worth calculations show that the market is efficient by international standards, with a money's worth above 0.9 for the whole period and close to unity by the end of the period. We present conflicting evidence on the existence of adverse selection because although we find money's worths are inversely related to age of purchase, we find that they are positively related to size of purchase.

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The authors gratefully acknowledge support for this research from NETSPAR. An earlier version of this paper was presented at a Netspar Panel Session, April 2011, and the annuities workshop at Eidgenössische Technische Hochschule, Zürich, 2011; the paper has benefited from comments by Rob Alessie, Tim Boonen, Alwin Oerlemans, Adrie Moons, Kim Peijnenburg and Marno Verbeek. The data used in this paper was provided by Money View and the authors are grateful to Hedwig Dros, Henk Don, Arie Perfors, Emile Smits, and Jan-Bert Windhorst for assistance in obtaining and interpreting the data.

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Journal of Pension Economics & Finance
  • ISSN: 1474-7472
  • EISSN: 1475-3022
  • URL: /core/journals/journal-of-pension-economics-and-finance
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