The choice between an annuity and a lump sum: Results from Swiss pension funds
Journal
Journal of Public Economics
ISSN
0047-2727
ISSN-Digital
1879-2316
Type
journal article
Date Issued
2007-11-01
Author(s)
Abstract
This paper uses unique micro data from Swiss employer-based pension plans to study the annuitization decision at retirement. The administrative nature of our data, though limited with respect to individual background characteristics, allows us to analyze real choices over large retirement balances, rather than subjectively reported intentions to annuitize. We find a strong and robust impact of a utility-based measure of the annuity's value (computed within a life-cycle framework) on individual annuitization rates. Low accumulation of retirement assets is strongly associated with the choice of the lump sum, presumably due to the availability of means-tested social assistance. The sponsor's default option, in most cases the annuity, is also found to be highly influential in the decision to annuitize.
Language
English
Keywords
Annuity puzzle
Occupational pension
Annuity
Lump sum
HSG Classification
contribution to scientific community
Refereed
Yes
Publisher
Elsevier
Publisher place
Amsterdam
Volume
91
Number
10
Start page
1944
End page
1966
Pages
23
Subject(s)
Eprints ID
43819