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The determinants of annuitization: evidence from Sweden

Listed author(s):
  • Hagen, Johannes

    ()

    (Uppsala Center for Fiscal Studies)

This paper uses unique micro data from a Swedish occupational pension plan to study the determinants of annuitization. The data is merged with national administrative data to create a large data set with rich individual background characteristics. The pension can either be withdrawn as a life annuity or during a fixed number of years with a minimum of five years. Low accumulation of assets is strongly associated with the choice of the 5-year payout. Consistent with the predictions of a life-cycle model, retirees who choose the 5-year payout are in worse health and exhibit higher ex-post mortality rates than annuitants. I also find that the parents of annuitants live longer than the parents of those who choose the 5- year payout. This suggests that individuals form expectations about how long they are likely to live based on the life-span patterns of their parents and take this into account when they decide whether to annuitize or not.

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File URL: http://ucfs.nek.uu.se/digitalAssets/299/299928_1201413.pdf
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Paper provided by Uppsala University, Department of Economics in its series Working Paper Series, Center for Fiscal Studies with number 2014:13.

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Length: 34 pages
Date of creation: 14 Nov 2014
Publication status: Published as Hagen, Johannes, 'The determinants of annuitization: evidence from Sweden' in International Tax and Public Finance, 2015, pages 549-578.
Handle: RePEc:hhs:uufswp:2014_013
Contact details of provider: Postal:
Department of Economics, Uppsala University, P. O. Box 513, SE-751 20 Uppsala, Sweden

Phone: + 46 18 471 25 00
Fax: + 46 18 471 14 78
Web page: http://www.nek.uu.se/
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