Mirae Asset Publishes Analysis Report on Responding to Low Interest Rates and Longevity in the US Pension Market

Analysis of the US Pension Market Response and Institutional Changes Over the Past 100 Years

[Asia Economy Reporter Minwoo Lee] A report analyzing the changes in the US pension market over the past approximately 100 years has been published.

Mirae Asset Investment and Pension Center announced on the 3rd that it has published the 50th issue of the Investment and Pension Report titled "The Arrival of the Low Interest Rate and Longevity Era and the US Pension Market's Response," which contains this information.

The report cited the development of pension products in response to market changes and changes and improvements in pension systems to cope with the longevity era as the secrets to the growth of the US pension market. First, it summarized the process by which the US pension market developed pension products in response to interest rate and market changes.

From the 1930s to the 1970s, after the Great Depression, annuities were highlighted as safe long-term savings products. Annuities supplied by insurance companies promised fixed returns, gaining popularity and serving as a catalyst for the pension market's full-scale growth.

From the 1980s to 2000, stock market rises and the expansion of variable annuity sales occurred. The post-World War II economic boom led to a culture of pursuing high returns through rising stock prices. Consequently, variable annuities, which invest in equity-type products to increase returns, were developed, and their sales surged alongside the stock market rise after the 1980s.

Since the 2000s, medium-risk and medium-return pension products have developed. Due to declining interest rates and increased stock price volatility, products seeking intermediate levels of risk and return by combining the advantages of fixed annuities and variable annuities were developed. Representative examples include the "minimum guaranteed return index annuity," which can earn additional returns on fixed annuities, and "structured annuities," which limit the downside risk of variable annuities.

The report also highlighted policy changes. The US government first promoted longevity annuities. Longevity annuities, which pay out after age 80, can address longevity risk with relatively low premiums. They are being promoted by granting tax benefits to "qualified longevity annuities" that can be included in retirement accounts. Additionally, the inclusion of annuities in retirement accounts to secure lifelong income was encouraged. Recognizing the need to increase the inclusion of annuities capable of lifetime payments in defined contribution (DC) retirement accounts to secure lifelong income for households, related laws have been enacted and restrictions on including such products in retirement account portfolios have been eased.

This report containing these details can be downloaded for free from the Mirae Asset Investment and Pension Center website. Senior researcher Hyunjung Shim of the Mirae Asset Investment and Pension Center emphasized, "For the development of the domestic pension market, it is necessary to develop pension products that respond to low interest rates and the longevity era," adding, "Utilization methods of pensions as core retirement assets in the longevity era should be presented, and continuous education for implementation must be conducted."

This content was produced with the assistance of AI translation services.