Real estate pension schemes: modeling and perspectives

The critical aspects of pension systems, viewed in relation to the problems of private savings, have long been the subject of scientific, legal, as well as political debate. The need to set up a reliable system able to support public and professional pension systems (with the latter often struggling, too) is a critical issue for governments and regulatory institutions. In this Chapter we present the Real Estate Pension Scheme (REPS) in its basic actuarial connotations, focusing on the control of financial risk and detailing the components of the insurer’s actuarial benefit assessment rate. The source of financial risk is studied in its impact on the amount of the annuity payment due to the insured. Several tables show the sensitivity of the installment to changes in the significant parameters identified in our analysis. This study is extended to a number of European countries in order to make the comparison among various real estate markets.