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The determinants of annuitization: evidence from Sweden

Johannes Hagen ()

International Tax and Public Finance, 2015, vol. 22, issue 4, 549-578

Abstract: Despite the fact that the increasing involvement of the private sector in pension provision has brought more flexibility to the pay-out phase of retirement, little is known about the characteristics of those who choose to annuitize their pension wealth and those who do not. I combine unique micro-data from a large Swedish occupational pension plan with rich national administrative data to study the choice between life annuities and fixed-term payouts with a minimum payout length of 5 years for 183,000 retiring white-collar workers. I find that low accumulation of assets is strongly associated with the choice of the 5-year payout. Consistent with individuals selecting payout length based on private information about their mortality prospects, individuals who choose the 5-year payout are in worse health, exhibit higher ex-post mortality rates and have shorter-lived parents than annuitants. Individuals also seem to respond to large, tax-induced changes in annuity prices. Copyright Springer Science+Business Media New York 2015

Keywords: Annuity puzzle; Longevity insurance; Occupational pension; Adverse selection; Administrative data; D91; H55; J26; J32 (search for similar items in EconPapers)
Date: 2015
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Working Paper: The determinants of annuitization: evidence from Sweden (2014) Downloads
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