Work

How Deep Is the Annuity Market Participation Puzzle?

Year: 2010

Type: article

Abstract: Using U.K. microeconomic data, we analyze the empirical determinants of voluntary annuity market demand. We find that annuity market participation increases with financial wealth, life expectancy and education and decreases with other pension income and a possible bequest motive for surviving spouses. We then show that these empirically motivated determinants of annuity market participation have the same, quantitatively important, effects in a life-cycle model of annuity and life insurance demand, saving and portfolio choice. Moreover, reasonable preference parameters predict annuity demand levels comparable to the data. For stockholders, a strong bequest motive can simultaneously generate balanced portfolios and low annuity demand.

Source: Review of Financial Studies

DOI: 10.1093/rfs/hhq080

Authors: Joachim Inkmann, Paula Lopes, Alexander Michaelides

Institutions: The University of Melbourne, Tilburg University, London School of Economics and Political Science, University of Cyprus

Language: English

Topic: Financial Literacy, Pension, Retirement Analysis

Subfield: Accounting

Field: Business, Management and Accounting

Domain: Social Sciences

Open Access status: bronze

Funders: London School of Economics and Political Science, Centre for Economic Policy Research, University College London, European Commission

OpenAlex ID: W2254688983