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What determines annuity demand at retirement?

Author

Listed:
  • Giuseppe Cappelletti

    () (Bank of Italy)

  • Giovanni Guazzarotti

    () (Bank of Italy)

  • Pietro Tommasino

    () (Bank of Italy)

Abstract

In most advanced countries, future retirees will have to rely less on social security schemes and more on private pension plans, which mostly leave to the worker the choice between ashing-in or annuitizing pension wealth at retirement. Therefore, a better understanding of the determinants of the demand for annuities will soon become a priority. Research in this field has been hampered by lack of data (due to current market thinness) and by difficulties in disentagling demand from supply-side effects. In this paper, we avoid these problems resorting to ad hoc survey data from Italy. Our results highlight the importance of wealth, impatience, education and (to a lesser extent) financial literacy in shaping annuity demand.

Suggested Citation

  • Giuseppe Cappelletti & Giovanni Guazzarotti & Pietro Tommasino, 2011. "What determines annuity demand at retirement?," Temi di discussione (Economic working papers) 805, Bank of Italy, Economic Research and International Relations Area.
  • Handle: RePEc:bdi:wptemi:td_805_11
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    File URL: http://www.bancaditalia.it/pubblicazioni/temi-discussione/2011/2011-0805/en_tema_805.pdf
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    References listed on IDEAS

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    Cited by:

    1. Jeffrey R. Brown & Arie Kapteyn & Erzo F.P. Luttmer & Olivia S. Mitchell, 2017. "Cognitive Constraints on Valuing Annuities," Journal of the European Economic Association, European Economic Association, vol. 15(2), pages 429-462.
    2. Giovanni Gallo & Costanza Torricelli & Arthur van Soest, 2016. "Individual heterogeneity and pension choices: How to communicate an effective message?," Center for the Analysis of Public Policies (CAPP) 0136, Universita di Modena e Reggio Emilia, Dipartimento di Economia "Marco Biagi".
    3. Martin Eling & Shailee Pradhan & Joan T Schmit, 2014. "The Determinants of Microinsurance Demand," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 39(2), pages 224-263, April.
    4. Costanza Torricelli & Maria Cesira Urzì Brancati & Marco Santantonio, 2016. "Does Homeownership Partly Explain Low Participation in Supplementary Pension Schemes?," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 45(2), pages 179-203, July.

    More about this item

    Keywords

    annuities; retirement; life cycle model;

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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