Preferences for Annuities in Israel and Their Psychological Determinants

Omer Selivansky, David Leiser and Avia Spivak

Chapter 14 in Behavioral Finance:A Novel Approach, 2020, pp 325-348 from World Scientific Publishing Co. Pte. Ltd.

Abstract: This chapter examines retirement savings withdrawal preferences in Israel and the psychological and demographic factors that affect them, by questioning recipients in a setting where real-life pension decisions are made. Unlike findings from other countries, most of the participants preferred annuity over a lump sum withdrawal. Lower confidence in the system and higher self-confidence were significantly associated with lump sum withdrawals preference. We suggest that the preference for an annuity stems from a default setting: pension savings in Israel have long been defined benefit (DB), that is, a fixed pension which to the recipient is more similar to an annuitized defined contribution (DC) system than to a lump sum withdrawal.

Keywords: Analysts Recommendations; Behavioral Biases; Behavioral Economics; Behavioral Finance; Board of Directors; Compensation; Compensation Committee; Control; Coronavirus; Corporate Governance; COVID-19; Decision Making; Disposition Effect; Earnings Management; Elections; Emotions; Financial Crises; Financial Market Anomalies; Financial Markets; Forecast-Accuracy; Gender Differences; Heuristics; Interval Forecasting; Investment; Investor Horizon; Investors' Beliefs; IPO Under-Pricing; Life Expectancy; Myopia; Overconfidence; Pensions Industry; Policy Reforms; Polls; Portfolio Risk; Prediction Markets; Regulation; Stock Price Drifts; Time Preferences (search for similar items in EconPapers)
JEL-codes: G3 G30 G4 G41 (search for similar items in EconPapers)
Date: 2020
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