The determinants of annuitization: evidence from Sweden

Johannes Hagen ()

No 2014:13, Working Paper Series, Center for Fiscal Studies from Uppsala University, Department of Economics

Abstract: This paper uses unique micro data from a Swedish occupational pension plan to study the determinants of annuitization. The data is merged with national administrative data to create a large data set with rich individual background characteristics. The pension can either be withdrawn as a life annuity or during a fixed number of years with a minimum of five years. Low accumulation of assets is strongly associated with the choice of the 5-year payout. Consistent with the predictions of a life-cycle model, retirees who choose the 5-year payout are in worse health and exhibit higher ex-post mortality rates than annuitants. I also find that the parents of annuitants live longer than the parents of those who choose the 5- year payout. This suggests that individuals form expectations about how long they are likely to live based on the life-span patterns of their parents and take this into account when they decide whether to annuitize or not.

Keywords: Annuity puzzle; Longevity insurance; Occupational pension; Adverse selection (search for similar items in EconPapers)
JEL-codes: D91 H55 J26 J32 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2014-11-14
New Economics Papers: this item is included in nep-age and nep-ias
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Published as Hagen, Johannes, 'The determinants of annuitization: evidence from Sweden' in International Tax and Public Finance, 2015, pages 549-578.

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Journal Article: The determinants of annuitization: evidence from Sweden (2015)
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