We analyse annuitization rates by policyholders with individual deferred annuities in Korea to assess the impact of different tax policies on payout decisions between 2008 and 2011. Under the Korean tax system, two types of individual deferred annuities were sold: qualified (taxed for lump sums) and non-qualified (tax free for lump sums). Our results show that policyholders with qualified contracts are more likely to select a life annuity option than a lump-sum distribution, compared to policyholders of non-qualified contracts. This suggests that policyholders are more likely to use non-qualified contracts as savings vehicles than as longevity insurance.

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This paper investigates whether retirement pension service providers suggesting investment line-up favor their affiliated funds. We find that affiliated funds are treated loosely in addition and deletion criteria compared to non-affiliated funds. For example, poorly-performing affiliated funds are less likely to be removed from a line-up than non-affiliated funds. The result indicates that conflicts of interest exist between service providers and participants in the retirement pension market. Best of all, regulatory actions should be employed to mitigate the conflicts. We propose that an independent governance committee in each pension provider is the appropriate countermeasure to minimize unfair investment behavior and to protect participants' interests.

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