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Design of comprehensive income products for retirement using utility functions

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  • Geoffrey J Warren

Abstract

An approach for designing a menu of comprehensive income products for retirement (CIPRs) is proposed and demonstrated. The approach entails four steps: defining and characterising member types based on selected attributes; specifying a utility function to capture the objectives and preferences for each member type; conducting analysis of candidate investment and drawdown strategies, and hence select a product design; and communication to members. The last step uses attributes to describe the type of investor for which a product is designed, as well as setting out the key product features and the outcomes it may deliver. JEL Classification: D14, D15, E21, G11, G23

Suggested Citation

  • Geoffrey J Warren, 2022. "Design of comprehensive income products for retirement using utility functions," Australian Journal of Management, Australian School of Business, vol. 47(1), pages 105-134, February.
    • Handle: RePEc:sae:ausman:v:47:y:2022:i:1:p:105-134
    DOI: 10.1177/0312896220985327
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    More about this item

    Keywords

    CIPRs; drawdown strategies; portfolio choice; product design; retirement savings; utility;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D15 - Microeconomics - - Household Behavior - - - Intertemporal Household Choice; Life Cycle Models and Saving
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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