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The determinants of annuitization: evidence from Sweden

Listed author(s):
  • Johannes Hagen

    ()

Despite the fact that the increasing involvement of the private sector in pension provision has brought more flexibility to the pay-out phase of retirement, little is known about the characteristics of those who choose to annuitize their pension wealth and those who do not. I combine unique micro-data from a large Swedish occupational pension plan with rich national administrative data to study the choice between life annuities and fixed-term payouts with a minimum payout length of 5 years for 183,000 retiring white-collar workers. I find that low accumulation of assets is strongly associated with the choice of the 5-year payout. Consistent with individuals selecting payout length based on private information about their mortality prospects, individuals who choose the 5-year payout are in worse health, exhibit higher ex-post mortality rates and have shorter-lived parents than annuitants. Individuals also seem to respond to large, tax-induced changes in annuity prices. Copyright Springer Science+Business Media New York 2015

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File URL: http://hdl.handle.net/10.1007/s10797-015-9360-5
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Article provided by Springer & International Institute of Public Finance in its journal International Tax and Public Finance.

Volume (Year): 22 (2015)
Issue (Month): 4 (August)
Pages: 549-578

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Handle: RePEc:kap:itaxpf:v:22:y:2015:i:4:p:549-578
DOI: 10.1007/s10797-015-9360-5
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