Benefit profiles

Ermanno Pitacco

8.1 INTRODUCTION: THE TIME PROFILE OF BENEFITS

Payment profiles in the general context of cashflow streams and annuities are addressed in Section 1.2.1 (Figure 1.1 in particular).

We now move on to the specific context of life annuities and, according to the classification criterion proposed in Section 4.6.1, we first recognise two broad classes of life annuities:

  1. annuities with pre-defined benefits;

  2. annuities with benefits determined according to some linking mechanism,

and for each class we single out various subclasses, as shown in Figure 8.1.

In the following sections, we briefly describe the possible benefit profiles when benefits are pre-defined, and then we move on to various benefit linking mechanisms. Special attention should be paid to the meaning of “varying annuities”, which describes some types of life annuities with pre-defined benefits as well as all life annuities based on linking mechanisms.

8.2 PRE-DEFINED BENEFITS

Life annuities with pre-defined benefits provide the annuitant with annual amounts stated at policy issue. Referring to life annuities-immediate, we denote the annual benefits by b1, b2, b3, . . . .

Level life annuities

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