Valuation of Equity Release Contracts in Czech Republic, Republic of Poland and Slovak Republic

Agnieszka Marciniuk , Emilia Zimkova , Vlastimil Farkasovsky , Colin W. Lawson

Abstract

An 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.
Author Agnieszka Marciniuk (E&F / DoS)
Agnieszka Marciniuk,,
- Department of Statistics
, Emilia Zimkova - Matej Bel University in Banska Bystrica (UMB)
Emilia Zimkova,,
-
, Vlastimil Farkasovsky - Matej Bel University in Banska Bystrica (UMB)
Vlastimil Farkasovsky,,
-
, Colin W. Lawson - University of Bath [Matej Bel University in Banska Bystrica (UMB)]
Colin W. Lawson,,
-
- Univerzita Mateja Bela v Banskej Bystrici
Journal seriesPrague Economic Papers, ISSN 1210-0455, e-ISSN 2336-730X, (N/A 40 pkt)
Issue year2020
Vol29
No5
Pages505-521
Publication size in sheets0.8
Keywords in EnglishEquity release contract, reverse annuity contract, reverse mortgage, pension funding gap, Svensson model
ASJC Classification2002 Economics and Econometrics; 2003 Finance
DOIDOI:10.18267/j.pep.743
Languageen angielski
LicenseJournal (articles only); published final; Uznanie Autorstwa - Użycie Niekomercyjne - Bez utworów zależnych (CC-BY-NC-ND); after publication
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Valuation_of_Equity_Release_Contracts.pdf 363,84 KB
Score (nominal)40
Score sourcejournalList
Publication indicators Scopus SNIP (Source Normalised Impact per Paper): 2018 = 0.712; WoS Impact Factor: 2017 = 0.409 (2) - 2017=0.557 (5)
Citation count*
Additional fields
UwagaFinancial 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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* presented citation count is obtained through Internet information analysis and it is close to the number calculated by the Publish or Perish system.
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