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Should You Take a Lump-Sum or Annuitize? Results from Swiss Pension Funds

Monika Bütler () and Federica Teppa

University of St. Gallen Department of Economics working paper series 2005 from Department of Economics, University of St. Gallen

Abstract: We use a unique dataset on individual retirement decisions in Swiss pension funds to analyze the choice between an annuity and a lump sum at retirement. Our analysis suggests the existence of an "acquiescence bias", meaning that a majority of retirees chooses the standard option offered by the pensions fund or suggested by common practice. Small levels of accumulated pension capital are much more likely to be withdrawn as a lump sum, suggesting a potential moral hazard behavior or a magnitude effect. We hardly find evidence for adverse selection effects in the data. Single men, for example, whose money's worth of an annuity is considerably below the corresponding value of married men, are not more likely to choose the capital option.

JEL-codes: D91 H55 J26 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2005-10
New Economics Papers: this item is included in nep-fin, nep-fmk and nep-pbe
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