The Study Of Asset Allocation Based On Personal Annuity

In2000,China has entered the ranks of the aging state,how to make the old peoplelive a good life becomes the most utmost question of China.Our government adopted therecommendations of the World Bank, established by the state pension,enterprise annuityand personal annuity as one of the "three pillar" pension system in order to make theelderly reach the "sense of security" goals by pension insurance and life assurance.At present, China’s pension insurance system gradually improved,but still faces manytroubles, so encourage people to build up their own pension system offering a usefulmeans to work out our country’s pension problems. Additionally, China’s personal annuitymarket develops quickly and people’s choice has enriched, so annuity products forpersonal asset allocation strategy has appealled more and more people and researchers. InWestern society, due to the private annuity system has fully developed,the purchase ofpension annuity products to allocate ones asset has become a consensus, and there havebeen many scholars comprehensive study the issue.Yaari proposed the "annuitypuzzle",whose model has become the classic framework of the follow-up related issues.In addition, with the behavioral economics gradually accepted by mainstream economists,scholars begin to re-examine all the classic models based on expected utility theory inorder to obtain new findings. Based on the points, this article hopes follow-up Yaari’sframework and using the behavior economic theories to introduce a new perspective tore-consider the pension asset allocation decisions for the individual, and make a optimalasset allocation strategy for people,and enable them to maximize personal utility.In this paper we use the Backwards Induction strategy,with Monte Carlo method tosimulate the model,and conclusions follows:When buying an annuity products with lowextra costs, more young people should purchase immediate annuity products to protecttheirselves against the uncertainty risks of income and increase their utility; otherwise dueto additional costs,there is a investment threshold,and the young people have to purchaseliquid assets to accumulate their wealth; when the bequest desire exists,even in the final stage of life,people still should invest flow-based assets to meet their desire to bequeath tooffspring; on the other hand, if people have no bequest motive,then they should give uppersonal savings and investment,just arrange their wealth reasonable and consume themall before death,it puts forward a useful interpretation for the "annuity puzzle".