The Effect on Annuities Preference of Prompts to Consider Life Expectancy: Evidence from a UK Quota Sample

Jenny Robinson and David A. Comerford

Economica, 2020, vol. 87, issue 347, 747-762

Abstract: State‐run pensions advice websites in the UK and the USA recommend considering how long the pension needs to last and offer a life expectancy calculator for this purpose. Theories make conflicting predictions regarding the effect on annuities preference of following this recommendation. We asked a quota sample of over 2000 UK residents to choose between an annuity or cashing out their pension. Whereas a control group made this choice without any prompt, three treatment groups were asked prior to choice how long their retirement would last, or what age they would live to, or what age they would die by. Asking about life expectancy reduced preference for annuities relative to the control condition. This research suggests that the reference to life expectancy on the UK's pension advice website exacerbates underannuitization.

Date: 2020
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