The annuity puzzle remains a puzzle

Peijnenburg, Kim; Nijman, Theo; Werker, Bas J. M.

doi:10.1016/j.jedc.2016.05.023

Cited by 63 publications

(21 citation statements)

References 47 publications

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“…Several authors take into account the consumption floor provided by a government in case the resources of a retiree are insufficient, which may imply that low‐wealth individuals stop annuitizing, whereas wealthier retirees annuitize more (Ai et al., ), or that the impact depends on model assumptions (Pashchenko, ; Peijnenburg et al., ).…”

Section: Three Aspects Of Annuitization Decisionsmentioning

confidence: 99%

“…() find that lower recovery rates may even slightly increase annuity demand due to lower prices, while Peijnenburg et al. () observe that an insurer's default probability must exceed a certain value to make full annuitization suboptimal.…”

Section: Three Aspects Of Annuitization Decisionsmentioning

confidence: 99%

“…Moreover, Gong and Webb () find that real annuities can have higher or lower money's worth ratios (MWRs) than nominal ones, while Peijnenburg et al. () observe higher or lower annuitization rates for these products depending on the choice of model parameters. Furthermore, Hanewald et al.…”

Section: Three Aspects Of Annuitization Decisionsmentioning

confidence: 99%

“…Several papers are also dedicated to the impact of returns on alternative investments on annuity demand, where more attractive alternative investments imply a later date of annuitization (Milevsky, ; Mitchell et al., ; Emms and Haberman, ; Gerrard et al., ), or a lower annuitized amount and vice versa (Hainaut and Devolder, ; Chai et al., ; Chalmers and Reuter, ; Peijnenburg et al., ; Previtero, ). Horneff at al.…”

Section: Three Aspects Of Annuitization Decisionsmentioning

confidence: 99%

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What Do We Know About Annuitization Decisions?

Alexandrova¹,

Gatzert²

2019

Risk Manage Insurance Review

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Against the background of aging societies and increasing life expectancies, the protection of individuals from outliving their savings has become increasingly relevant. Annuities represent insurance against longevity risk and can prevent old‐age poverty. The aim of this article is to present the current state of theoretical, empirical and experimental evidence with regard to annuitization decisions. Toward this end, we conduct a systematic literature review that includes 89 articles. Based on this, we study welfare effects of mandatory annuitization, annuitization rates and the optimal fraction of wealth to be annuitized, as well as determinants of retirees’ choice to annuitize and their impact on annuity demand. Finally, we present possible solutions for overcoming the low uptake of annuities based on its causes. One main result is that behavioral biases in annuitization decisions particularly require considerably more theoretical research and empirical evidence, and that theoretical models already appear to well explain empirically observed annuitization rates.

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Section: Three Aspects Of Annuitization Decisionsmentioning

confidence: 99%

Section: Three Aspects Of Annuitization Decisionsmentioning

confidence: 99%

Section: Three Aspects Of Annuitization Decisionsmentioning

confidence: 99%

Section: Three Aspects Of Annuitization Decisionsmentioning

confidence: 99%

See 2 more Smart Citations

What Do We Know About Annuitization Decisions?

Alexandrova¹,

Gatzert²

2019

Risk Manage Insurance Review

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“…In both cases, we suppose that the annuity premium is such that annuity providers make no profit. Illiquid annuities have been introduced in life‐cycle models by Horneff, Maurer, and Stamos () and Peijnenburg, Nijman, and Werker () in order to discuss the issue of low demand for annuities. Our purpose is to study analytically the equilibrium and welfare consequences of the existence of such contracts.…”

Section: Introductionmentioning

confidence: 99%

Illiquid life annuities

d’Albis

Etner

2017

J Public Economic Theory

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In this paper, we consider illiquid life annuity contracts and show that they may be preferred to those illustrated by Yaari. In an overlapping generations economy, liquid life annuities are demanded only if the equilibrium is dynamically inefficient. However, an equilibrium displaying a positive demand for illiquid life annuities is indeed efficient. In this latter case, the welfare at steady state is larger if illiquid life annuity contracts are available.

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Accelerating the Distribution of Financial Products Through Classification and Regression Techniques

Ribes

2024

Lecture Notes in Networks and Systems

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Background context. To date, financial products mostly consists in instruments used by households to prepare for retirement (consumption smoothing across the various stages of and one's life-cyle) and/or to transfer wealth across generations. However, the current financial system is not completely efficient in doing so as the level of participation of households remains low. This calls for potentially new tools and techniques aimed at accelerating the distribution of the said products.Specific knowledge gap the work aims to fill . The current studies available on Fintechs & the distribution of financial products mostly revolve around notions of robo-advisors. Use cases usually orbit around automatically structuring & managing households portfolios under risk (incl. diversification) and performance constraints (e.g. what is the mix of bond and equity to use within a retirement plan to optimize the performance measured as the Sharpe ratio?). However there is no available study on the choices made by households on the products themselves, the associated drivers and the level of investments, a gap this study aims to bridge.Methods used in the study. This study leverages a private data-set from aFrench Fintech describing at a macro level the structure of 1.5K+ households and their wealth. Post feature selection and data cleansing, the information is fed to standard classification algorithms (e.g. random forest, support vector machine...) and regression techniques (linear regression, multiple kernel estimators...) to predict whether or not households are likely to subscribe to a life insurance or a retirement plan or a real estate program over the forthcoming year and to forecast the associated level of investment . Key findings. The current data-set shows that macro levels indicators onFrench household structure and wealth can be used to predict their subscription behavior over the next 12 months towards core investments products with a high level of performance (A.U.C > 90%). However, macro level information appears insufficient to predict the level of investments on those products (R 2 < 30 − 40%).Implications. The study shows that standard classification techniques could be used by financial advisors to accelerate client discovery on their existing portfolio. This could thereby improve the distribution of financial products and result in productivity gains for those professionals.

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The annuity puzzle remains a puzzle

Cited by 63 publications

References 47 publications

What Do We Know About Annuitization Decisions?

What Do We Know About Annuitization Decisions?

Illiquid life annuities

Accelerating the Distribution of Financial Products Through Classification and Regression Techniques

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