The Design of Pension Pay Out Options when the Health Status during Retirement is Uncertain

Mathias Kifmann (mathias.kifmann@wiso.uni-hamburg.de)

No 2211, CESifo Working Paper Series from CESifo

Abstract: This paper examines the optimal design of pension plans when the health status during retirement is uncertain. Assuming that the health status affects both life expectancy and the marginal utility of consumption, choice between a lump-sum payment and an annuity can be welfare-enhancing if the health status is not observable by pension plans. This result holds if the marginal utility of consumption and life expectancy are negatively correlated. On equity grounds, a lump-sum option can be justified even if the marginal utility of consumption is independent of life expectancy.

Keywords: pensions; lump-sum withdrawal; annuities; longevity (search for similar items in EconPapers)
JEL-codes: D82 G23 H55 (search for similar items in EconPapers)
Date: 2008
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Journal Article: The Design of Pension Pay Out Options When the Health Status during Retirement Is Uncertain (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_2211

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