A Comparison of the Rates of Return Offered
by the National Pension Fund, Post Office
Pensions, and Personal Pension Plans
of Life Insurance Companies

Eiji TAJIKA* and Fumiko HAYASHI

In the personal pension market, information on the probability of survival is inadequate. As a result, adverse selection may occur and those with a low probability of survival may be excluded. In the U.S. insurance market, this type of failure has been considered a serious problem as it relates to personal pensions. This paper aims to compare three major types of personal pensions in Japan and determine whether adverse selection has occurred in these pension markets. As a result of our examination, we conclude that no such phenomenon has taken place for the three pension types. However, the profit rates of some pension plans are extremely vague, and this deficiency seems to have obstructed the growth of lifetime personal pension plans in Japan.

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