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Pension profile preferences: the influence of trust and expected expenses

Carin Cruijsen and Nicole Jonker

DNB Working Papers from Netherlands Central Bank, Research Department

Abstract: This paper studies the influence of people's expectations about expenses during retirement and trust in pension funds on preferences for different pension arrangements. We find that although most workers prefer a flat-rate annuity, many workers want to deviate from it. The most popular option is a high/low, annuity-based profile, followed by a partial lump sum payment. One of the underlying reasons for preferring a more flexible pattern is an expected shift in expenditure during retirement. Our regressions reveal that workers who expect declining expenses during retirement are more likely to opt for a high/low annuity-based pension and/or a lump sum payment at retirement than workers who expect stable expenses. Furthermore, we find that workers and pensioners who do not trust their pension fund are more likely to prefer a lump sum over annuity-based arrangements than workers and pensioners with a high degree of trust.

Keywords: consumption; trust; pension annuities; lump sum (search for similar items in EconPapers)
JEL-codes: D14 D91 G20 J26 (search for similar items in EconPapers)
Date: 2016-11
New Economics Papers: this item is included in nep-age
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Journal Article: Pension profile preferences: the influence of trust and expected expenses (2019) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:dnb:dnbwpp:535

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