Valuation of Equity Release Contracts in Czech Republic, Republic of Poland and Slovak Republic
Agnieszka Marciniuk , Emilia Zimkova , Vlastimil Farkasovsky , Colin W. Lawson
AbstractAn ageing European population and, therefore, a rising dependency ratio of retirees to the working population, strongly suggests that a pension funding gap will be a key social issue in future. Yet many older people have significant real estate assets that they could access using equity release products. They could sell their assets in exchange for lifelong or temporary monthly payments. Equity release products are relatively new to Poland, but are not yet offered by commercial banks in Czechia and Slovakia. This paper estimates the potential benefits of marriage reverse annuity, and reverse mortgage contracts, using the Svensson model function, and empirical property data from selected Czech, Slovak and Polish cities. The results are also compared to the average pension of inhabitants in the selected cities. It is shown that there is substantial scope for boosting retirement income in all the cases considered, though the precise size of the increase depends on factors such as contract buyers’ age and life expectancy, the value of their assets, the payment consequences of a spouse’s death, and contract suppliers’ pricing policies.
|Journal series||Prague Economic Papers, ISSN 1210-0455, e-ISSN 2336-730X, (N/A 40 pkt)|
|Publication size in sheets||0.8|
|Keywords in English||Equity release contract, reverse annuity contract, reverse mortgage, pension funding gap, Svensson model|
|License||Journal (articles only); published final; ; after publication|
|Publication indicators||: 2018 = 0.712; : 2017 = 0.409 (2) - 2017=0.557 (5)|
|Uwaga||Financial support from VEGA (Project No. 1/0785/19 Construction and analysis of dynamic nonlinear models of macroeconomic processes) is gratefully acknowledged. Financial support from VEGA (Project No. 1/0608/19 Nexus of finance and growht in Visegrad countries) is gratefully acknowledged.|
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