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Selection Effects in the United Kingdom Individual Annuities Market

Author

Listed:
  • Amy Finkelstein

    (MIT)

  • James Poterba

    (MIT and NBER)

Abstract

This paper explores adverse selection in the voluntary and compulsory individual annuity markets in the United Kingdom. Two empirical regularities support standard models of adverse selection. First, annuitants are longer-lived than non-annuitants. These mortality differences are more pronounced in the voluntary than in the compulsory annuity market. We estimate that the amount of adverse selection in the compulsory market is about one half of that in the voluntary market. Second, the pricing of different types of annuity products within each annuity market is consistent with individuals selecting products based, in part, on private information about their mortality prospects. Copyright Royal Economic Society 2002

Suggested Citation

  • Amy Finkelstein & James Poterba, 2002. "Selection Effects in the United Kingdom Individual Annuities Market," Economic Journal, Royal Economic Society, vol. 112(476), pages 28-50, January.
    • Handle: RePEc:ecj:econjl:v:112:y:2002:i:476:p:28-50
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    References listed on IDEAS

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    2. Amy Finkelstein & James Poterba, 2004. "Adverse Selection in Insurance Markets: Policyholder Evidence from the U.K. Annuity Market," Journal of Political Economy, University of Chicago Press, vol. 112(1), pages 183-208, February.
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