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Precautionary Savings And The Demand For Annuities

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  • Michel Strawczynski

    (Bank of Israel)

Abstract

Two well­known results in the ifeld of annuities are: (i) egoistic agents should annuitize all their wealth and (ii) altruistic agents should segment their savings between riskless bonds (for bequests) and annuities (for consumption). Given these two results, it is puzzling to note that private annuity markets are thin. In this paper we show that in the presence of precautionary savings, altruistic agents reduce the demand for annuities. Thus, the lack of private annuity markets becomes less than a puzzle, and maybe explained by the existence of a low demand, which is satisfied by existing pension arrangements.

Suggested Citation

  • Michel Strawczynski, 1996. "Precautionary Savings And The Demand For Annuities," Bank of Israel Working Papers 1996.05, Bank of Israel.
    • Handle: RePEc:boi:wpaper:1996.05
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    References listed on IDEAS

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