How Deep is the Annuity Market Participation Puzzle?

Joachim Inkmann (), Paula Lopes () and Alexander Michaelides
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Paula Lopes: London School of Economics, FMG and Netspar

No 2009-5, Working Papers from Central Bank of Cyprus

Abstract: Using UK microeconomic data, we analyze the empirical determinants of voluntary annuity market demand. We find that annuity market participation increases with financial wealth, life expectancy and education and decreases with other pension income and a possible bequest motive for surviving spouses. We then show that these empirically-motivated determinants of annuity market participation have the same, quantitatively important, effects in a life-cycle model of annuity and life insurance demand, saving and portfolio choice. Moreover, reasonable preference parameters predict annuity demand levels comparable to the data. For stockholders, a relatively strong bequest motive is sufficient to simultaneously generate balanced portfolios and low annuity demand.

Keywords: Annuities; portfolio choice; life insurance; bequest motive (search for similar items in EconPapers)
JEL-codes: E21 H00 (search for similar items in EconPapers)
Pages: 59 pages
Date: 2009-10
New Economics Papers: this item is included in nep-ias and nep-mac
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Citations: View citations in EconPapers (5)

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Related works:
Journal Article: How Deep Is the Annuity Market Participation Puzzle? (2011)
Working Paper: How Deep is the Annuity Market Participation Puzzle? (2010)
Working Paper: How deep is the annuity market participation puzzle? (2009)
Working Paper: How deep is the annuity market participation puzzle? (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:cyb:wpaper:2009-5

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