Pension Demand and Utility: The Life Annuity Puzzle

Tomáš Cipra ()
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Tomáš Cipra: Faculty of Mathematics and Physics, Charles University of Prague

Czech Journal of Economics and Finance (Finance a uver), 2014, vol. 64, issue 3, 213-232

Abstract: This paper shows by means of the concept of utility that annuitization through life annui-ties or a pension can be an efficient instrument for the economic assurance of seniors. Various quantitative arguments are presented supporting this statement (e.g. annuity equivalent wealth [AEW] is calculated using Czech data). In conclusion, some practical arguments are mentioned regarding why the real demand on life annuities contradicts this result so that a so-called annuity puzzle arises in pension practice.

Keywords: annuity equivalent wealth; annuity puzzle; consumption strategy; pension demand; pension utility (search for similar items in EconPapers)
JEL-codes: G22 G23 G28 H55 J26 J32 (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:fau:fauart:v:64:y:2014:i:3:p:213-232

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