Presentation – Anja De Waegenaere

Title: Risk sharing in Group Self Annuitization (GSA) schemes with heterogeneous participants

Speaker: Anja De Waegenaere

Abstract: We analyze risk sharing in heterogeneous Group Self Annuitization Schemes (GSAs). In a GSA scheme, a group of individuals pools their funds to finance income until death without the intervention of an insurer. At the beginning of each period, the accumulated funds of participants that died in the previous period are redistributed over the surviving participants. Immediately thereafter, each surviving participant as well as each participant that newly enters the pool receives a benefit payment, and the remaining funds are invested according to the investment strategies chosen by the participants.  We consider GSAs in which participants can be heterogeneous in terms of wealth, survival rates, and investment strategy. We find that while heterogeneity in wealth and/or survival rates can have a substantial impact on the efficiency of risk sharing, the effect of heterogeneity in investment risk is negligible except for very small groups.