Skip to main content

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.

Hide All

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.

Hide All
Aben, Mauritz (2011) Overview of the Italian Pension System. Trento: Università degli studi di Trento, available at
Actuarieel Genootschap (2002) AG-Tafels 1995–2000.
Actuarieel Genootschap (2007) Over Sterfte en Overleven. An English version of the text is available as ‘On Mortality and Life Expectancy’.
Actuarieel Genootschap (2010) AG Prognosetafel 2010–2060. An English version of the text is available as ‘Life Expectancy, Projection Table 2010–60’.
Actuarieel Genootschap and Actuarieel Instituut (2009) Report on Principles for the Term Structure of Interest Rates: The Right Curve Does Not Exist.
Alessie, Rob, Van Rooij, Maarten and Lusardi, Annamaria (2011) Financial literacy and retirement preparation in the Netherlands. Journal of Pension Economics and Finance, 10: 527545.
Bateman, H. and Piggott, J. (2011) ‘Too Much Risk to Insure? The Australian (non-) Market for Annuities.’ in Mitchell, Piggott and Takayama (2011).
Brown, Jeffrey R., Mitchell, Olivia S., Poterba, James M. and Warshawsky, Mark J. (2001) The Role of Annuity Markets in Financing Retirement. Cambridge: MIT Press.
Brown, Jeffrey R., Kling, Jeffrey R., Mullainathan, Sendhil and Wrobel, Marian V. (2008) Why don't people insure late life consumption? A framing explanation of the under-annuitization puzzle. American Economic Review: Papers and Proceedings, 98(2): 304–09.
Bütler, Monika (2009) Switzerland: high replacement rates and generous subsistence as a barrier to work in old age. The Geneva Papers on Risk and Insurance-Issues and Practice, 34: 561577.
Bütler, Monika and Staubli, Stefan (2011) ‘Payouts in Switzerland: Explaining Developments in Annuitization’ in Mitchell, Piggott and Takayama, 2011.
Cannon, Edmund and Tonks, Ian (2008) Annuity Markets. Oxford: Oxford University Press.
Cannon, Edmund (2009) ‘Estimation and pricing with the Cairns-Blake-Dowd model of mortality)’, University of Verona, Dept of Economics, Working Paper 65.
Cannon, Edmund and Tonks, Ian (2011) ‘Compulsory and Voluntary Annuity Markets in the United Kingdom’ in Mitchell, Piggott and Takayama (2011).
Cannon, Edmund and Tonks, Ian (2013) ‘Cohort mortality risk or adverse selection in the UK annuity market?’ mimeo, University of Bristol.
European Commission Directorate-General for Economic and Financial Affairs (2009) ‘Pension Schemes and pension projections in the EU-27 member states 2008–2060: Volume I – Report’ European Economy Occasional Paper 56.
Finkelstein, Amy and Poterba, James (2002) Selection effects in the United Kingdom individual annuity market. Economic Journal, 112(476): 2850.
Holzmann, Robert and Hinz, Richard (2005) Old Age Income Support in the 21st Century. Washington, DC: World Bank.
James, Estelle and Song, Xi (2001) ‘Annuity markets around the world: money's worth and risk intermediation’ CeRP Working Paper 16/01.
James, Estelle, Martinez, Guillermo and Inglesias, Augusto (2006) The pay-out stage in Chile: who annuitizes and why? Journal of Pension Economics and Finance, 5(2): 121–54.
Kaschützke, Barbara and Maurer, Raimond (2011) ‘The Private Life Annuity Market in Germany: Products and Money's Worth Ratios’ in Mitchell, Piggott and Takayama (2011).
Mackenzie, George A. (2006) Annuity Markets and Pension Reform. Cambridge: Cambridge University Press.
Mitchell, Olivia S., Piggott, John and Takayama, Noriyuki (2011) Securing Lifelong Retirement Income: Global Annuity Markets and Policy. Oxford: Oxford University Press.
Paci, Sergio, Contaldo, Patrizia, Fiorentino, Claudio, Nocera, Giacomo, Spotorno, Lucia, Vallacqua, Francesco (2010) ‘Pension Funds in Italy’ CAREFIN Università Bocconi.
Palmer, Edward and Bo Larsson, (2011) ‘The Swedish annuity market: where it is and where it's headed’ in Mitchell, Olivia S., John Piggott and Noriyuki Takayama Securing Lifelong Retirement Income (Oxford University Press).
Pensions Commission (2004) Pensions: Challenges and Choices: The First Report of the Pensions Commission. London: HMSO.
Rinaldi, Ambrogio (2011) ‘Pension Awareness and Nationwide Auto-Enrolment: The Italian Experience’ CERP WP 104/11, Università di Torino.
Ruiz, Jose and Mitchell, Olivia (2011) ‘Pension Payouts in Chile: Past, Present and Future Prospects’ in Mitchell, Piggott and Takayama (2011).
Schnabel, Reinhold (2004) ‘Private annuities and public pensions in Germany’ in Fornero, Elsa, and Elisa Luciano Developing an Annuity Market in Europe (Edward Elgar).
Sheshinski, Eytan (2008) The Economic Theory of Annuities. Princeton: Princeton University Press.
Teppa, Federica (2011) ‘Can the Longevity Risk Alleviate the Annuitization Puzzle? Empirical Evidence from Dutch Data’ Netspar DP 09/2011-075.
Watson-Wyatt (2006) ‘Global Survey of Accounting Assumptions for Defined Benefit Plans’.
World Bank (1994) Averting the Old Age Crisis. Oxford: Oxford University Press.
Yaari, M. (1965) Uncertain lifetime, life assurance, and the theory of the consumer. Review of Economic Studies, 32(2): 137–50.
Recommend this journal

Email your librarian or administrator to recommend adding this journal to your organisation's collection.

Journal of Pension Economics & Finance
  • ISSN: 1474-7472
  • EISSN: 1475-3022
  • URL: /core/journals/journal-of-pension-economics-and-finance
Please enter your name
Please enter a valid email address
Who would you like to send this to? *



Full text views

Total number of HTML views: 0
Total number of PDF views: 0 *
Loading metrics...

Abstract views

Total abstract views: 0 *
Loading metrics...

* Views captured on Cambridge Core between <date>. This data will be updated every 24 hours.

Usage data cannot currently be displayed