Fong, Joelle HY
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Publication Collective Investments for Pension Saving: Lessons from Singapore’s Central Provident Fund Scheme(2010-01-01) Koh, Benedict SK; Mitchell, Olivia S; Fong, Joelle HYSingapore’s mandatory national defined contribution pension system permits participants to invest their retirement savings in a wide range of investment instruments if they wish, rather than leaving their savings in CPF accounts to earn interest rate by default. This paper asks whether workers seeking to earn higher returns can expect to do better than the CPF-managed default, by moving their money into professionally-managed unit trusts. We use historical data to investigate whether fund managers possess superior stock-picking and market-timing skills, as well as whether they exhibit persistence in performance and offer diversification benefits to participants. The evidence is mixed, which could explain why so few participants opt out of the CPF-run default fund.Publication Beyond Age and Sex: Enhancing Annuity Pricing(2011-06-01) Fong, Joelle HYPrices of standard annuity products in the United States do not currently reflect buyers’ personal characteristics other than age and sex. I show that several readily-measurable risk factors can significantly increase explained variability in mortality outcomes in a proportional hazards framework and use them to construct alternative pricing schemes. Simulation results show that more detailed pricing may help reduce adverse selection in annuity markets because shorter-lived groups are made much better off (and thus enter the market) while longer-lived groups are made only slightly worse off (and thus remain in the market).Publication Essays in Retirement Security(2011-05-16) Fong, HungyeeThe first chapter “Investment Patterns in Singapore’s Central Provident Fund System” investigates how plan participants in a national defined contribution system invest their pension accumulations. I find that only a small fraction of participants elects to invest in outside investment products like professionally-managed mutual funds. Simulation results using cost data from over 200 funds demonstrate that the minimum hurdle rate of return a fund must generate is about five percent a year. Accordingly, more policy attention can be devoted to lowering fund commission charges and rationalizing the investment menu offered to participants. In the second chapter “Longevity Risk Management in Singapore’s National Pension System”, I evaluate the money’s worth of life annuities and discuss the implications of the government entering the insurance market as a public-sector provider for annuities. I find that commercial insurers offer competitively-priced annuities with money’s worth ratios averaging 0.95, which are on par with those in other developed countries. On the other hand, the new annuities launched by government under an annuitization mandate are estimated to provide money’s worth ratios exceeding unity. This will benefit annuitants on average but implies that the annuity mandate will be expensive for the government if current pricing continues. The third chapter “Beyond Age and Sex: Enhancing Annuity Pricing” assesses how adopting more detailed pricing schemes may help reduce adverse selection in annuity markets. Prices of standard annuity products in the United States do not currently reflect buyers’ personal characteristics other than age and sex. I show that several readily-measurable risk factors can significantly increase explained variability in mortality outcomes in a proportional hazards framework and use them to construct alternative pricing schemes. Simulation results show that more detailed pricing may help reduce adverse selection in annuity markets because shorter-lived groups are made much better off (and thus enter the market) while longer-lived groups are made only slightly worse off (and thus remain in the market).Publication Longevity Risk Management in Singapore’s National Pension System(2010-07-01) Fong, Joelle HY; Koh, Benedict SK; Mitchell, Olivia SAlthough annuities are a theoretically appealing way to manage longevity risk, in the real world relatively few consumers purchase them at retirement. To counteract the possibility of retirees outliving their assets, Singapore’s Central Provident Fund, a national defined contribution pension scheme, has recently mandated annuitization of workers’ retirement assets. More significantly, the government has entered the insurance market as a public-sector provider for such annuities. This paper evaluates the money’s worth of life annuities and discusses the impact of the government mandate and its role as an annuity provider on the insurance market.