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Preferences for Annuities in Israel and Their Psychological Determinants

In: Behavioral Finance A Novel Approach

Author

Listed:
  • Omer Selivansky
  • David Leiser
  • Avia Spivak

Abstract

This chapter examines retirement savings withdrawal preferences in Israel and the psychological and demographic factors that affect them, by questioning recipients in a setting where real-life pension decisions are made. Unlike findings from other countries, most of the participants preferred annuity over a lump sum withdrawal. Lower confidence in the system and higher self-confidence were significantly associated with lump sum withdrawals preference. We suggest that the preference for an annuity stems from a default setting: pension savings in Israel have long been defined benefit (DB), that is, a fixed pension which to the recipient is more similar to an annuitized defined contribution (DC) system than to a lump sum withdrawal.

Suggested Citation

  • Omer Selivansky & David Leiser & Avia Spivak, 2020. "Preferences for Annuities in Israel and Their Psychological Determinants," World Scientific Book Chapters, in: Itzhak Venezia (ed.), Behavioral Finance A Novel Approach, chapter 14, pages 325-348, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789811229251_0014
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    More about this item

    Keywords

    Analysts Recommendations; Behavioral Biases; Behavioral Economics; Behavioral Finance; Board of Directors ; Compensation; Compensation Committee; Control; Coronavirus; Corporate Governance; COVID-19; Decision Making; Disposition Effect; Earnings Management; Elections; Emotions; Financial Crises; Financial Market Anomalies; Financial Markets; Forecast-Accuracy; Gender Differences; Heuristics; Interval Forecasting; Investment; Investor Horizon; Investors' Beliefs; IPO Under-Pricing; Life Expectancy; Myopia; Overconfidence; Pensions Industry; Policy Reforms; Polls; Portfolio Risk; Prediction Markets; Regulation; Stock Price Drifts; Time Preferences;
    All these keywords.

    JEL classification:

    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets
    • G4 - Financial Economics - - Behavioral Finance
    • G3 - Financial Economics - - Corporate Finance and Governance
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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