Valuation of equity release contracts in Poland compared to the Czech Republic and the Slovak Republic

Considerable progress in the development of medicine, and the growing awareness within society of healthy nutrition and lifestyle have contributed to the increase of life expectancy. The elderly population in Europe is growing. This population group will probably not have enough income to cover their retirement needs. It appears that the pension funding gap will become one of the critical social issues facing Europe. However, many elderly people hold a large amount of wealth in the form of real estate, however many of them do not want to sell their properties and to move from their home. However, markets in different countries offer the socalled equity release contract for the retired, which could help them cover their financial needs. People can surrender their real estate to a company interested in acquiring such a property, in exchange for monthly benefits. One such possibility is a reverse annuity contract (like a sales model) or a reverse mortgage (like a credit model), which have existed in Poland for several years. Due to the fact that the couples often own property, the marriage reverse annuity contract is considered here. This study’s main purpose is to apply the generalized reversionary annuity model to determine the benefit of marriage reverse annuity contracts and reverse mortgages (cf. Marciniuk, 2017). To determine the amount of two equity release contract the author considered a particular case of a marriage joint life and reversionary annuity (cf. Luciano,

Considerable progress in the development of medicine, and the growing awareness within society of healthy nutrition and lifestyle have contributed to the increase of life expectancy. The elderly population in Europe is growing. This population group will probably not have enough income to cover their retirement needs. It appears that the pension funding gap will become one of the critical social issues facing Europe. However, many elderly people hold a large amount of wealth in the form of real estate, however many of them do not want to sell their properties and to move from their home. However, markets in different countries offer the socalled equity release contract for the retired, which could help them cover their financial needs.
People can surrender their real estate to a company interested in acquiring such a property, in exchange for monthly benefits. One such possibility is a reverse annuity contract (like a sales model) or a reverse mortgage (like a credit model), which have existed in Poland for several years. Due to the fact that the couples often own property, the marriage reverse annuity contract is considered here.
This study's main purpose is to apply the generalized reversionary annuity model to determine the benefit of marriage reverse annuity contracts and reverse mortgages (cf. Marciniuk, 2017). To determine the amount of two equity release contract the author considered a particular case of a marriage joint life and reversionary annuity (cf. Luciano, (  0%, 50% .

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Moreover m means the number of sub-periods of year (m > 0) and (x, y) are ages of entry of x-year-old husband and y-year-old wife. The independent random variables ( ) Hence, the due benefit of a marriage reverse mortgage is determined by the following formula  Source: (Marciniuk, 2017).

Valuation of equity release contracts in Poland compared to the Czech Republic… 273
It is obvious that the benefit is higher when the price per square metre of the apartment is higher, and fraction R is smaller. The benefits calculated by the assumption of a constant interest rate are higher than in the case of the Svensson model. Equity release products are relatively new in Poland but they are not offered by commercial banks in the Czech and Slovak Republics. However, interest in these products is growing, especially as the minimum wage and pension in these countries are very low, therefore people have to look for an additional source of income. Consequently, the second result of the scientific research is the estimation the potential benefits of reverse marriage annuity and reverse mortgage contracts, using jointly the Svensson model function and empirical property data from the selected Czech, Slovak, and Polish cities (cf. Zimková 2018, Marciniuk et al. 2020). The real data of interest rate are taken from the Central European Bank. Most of the numerical examples are the result of the scientific cooperation of A. Marciniuk, E. Zimková, V. Farkašovský and C. Lawson (cf. Marciniuk and Zimková, 2018;Marciniuk et al., 2020). Some results were compared to the average pension of inhabitants from the selected cities, which can be seen in Table 2.  Source: (Marciniuk et al., 2020).
It is shown that there is substantial scope for boosting retirement income in all the cases considered, though the precise size of the increase depends on factors such as the age and life expectancy of the contract buyers, the value of their assets, the payment consequences of the death of a spouse, and the pricing policies of the contract suppliers (cf. Marciniuk et al., 2020).