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Payouts in Switzerland: Explaining Developments in Annuitization

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  • Monika Bütler

    ()

  • Stefan Staubli

    ()

Abstract

Switzerland is one of the few countries with long-term experience on the payout decisions made by retirees in fully-funded pension plans. Switzerland is also atypical in its unusually high annuitization rates: A majority of retirees covered by mandatory occupational pension plans choose an annuity. This paper will shed light on this extraordinary aspect. It revisits the historical role of occupational pension plans in the provision of old age income, and examines the role of regulation in the payout phase of the scheme. Recent developments in both market conditions and regulations are used to assess the impact of certain determinants of the annuitization decision, such as money’s worth ratios (MWR), means-tested benefits and behavioral factors.

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Paper provided by Department of Economics, University of St. Gallen in its series University of St. Gallen Department of Economics working paper series 2010 with number 2010-06.

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Length: 32 pages
Date of creation: Feb 2010
Date of revision:
Handle: RePEc:usg:dp2010:2010-06
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Keywords: Annuity Puzzle; Occupational Pension; Annuity; Lump Sum;

Find related papers by JEL classification:

  • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
  • D91 - Microeconomics - - Intertemporal Choice - - - Intertemporal Household Choice; Life Cycle Models and Saving
  • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
  • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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  1. Jeffrey R. Brown, 1999. "Private Pensions, Mortality Risk, and the Decision to Annuitize," NBER Working Papers 7191, National Bureau of Economic Research, Inc.
  2. James J. Choi & David Laibson & Brigitte C. Madrian, 2007. "Mental Accounting in Portfolio Choice: Evidence from a Flypaper Effect," NBER Working Papers 13656, National Bureau of Economic Research, Inc.
  3. Emmanuel Saez & Esther Duflo, 2003. "The role of information and social interactions in retirement plan decisions: Evidence from a randomized experiment," Framed Field Experiments 00141, The Field Experiments Website.
  4. Monika Bütler & Stefan Staubli & Maria Grazia Zito, 2008. "The Role of the Annuity’s Value on the Decision (Not) to Annuitize: Evidence from a Large Policy Change," CESifo Working Paper Series 2376, CESifo Group Munich.
  5. Monika Queisser & Edward R. Whitehouse, 2003. "Individual Choice in Social Protection: The Case of Swiss Pensions," OECD Social, Employment and Migration Working Papers 11, OECD Publishing.
  6. Monika Bütler & Kim Peijnenburg & Stefan Staubli, 2013. "How Much Do Means-Tested Benefits Reduce the Demand for Annuities?," NRN working papers 2013-11, The Austrian Center for Labor Economics and the Analysis of the Welfare State, Johannes Kepler University Linz, Austria.
  7. Esther Duflo & Emmanuel Saez, 2003. "The Role of Information and Social Interactions in Retirement Plan Decisions: Evidence from a Randomized Experiment," The Quarterly Journal of Economics, Oxford University Press, vol. 118(3), pages 815-842.
  8. Queisser, Monika & Vittas, Dimitri, 2000. "The Swiss multi-pillar pension system : triumph of common sense?," Policy Research Working Paper Series 2416, The World Bank.
  9. Butler, Monika & Teppa, Federica, 2007. "The choice between an annuity and a lump sum: Results from Swiss pension funds," Journal of Public Economics, Elsevier, vol. 91(10), pages 1944-1966, November.
  10. Monika Bütler, 2009. "Switzerland: High Replacement Rates and Generous Subsistence as a Barrier to Work in Old Age," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan, vol. 34(4), pages 561-577, October.
  11. Olivia S. Mitchell & James M. Poterba & Mark J. Warshawsky, . "New Evidence on the Money's Worth of Individual Annuities," Pension Research Council Working Papers 97-9, Wharton School Pension Research Council, University of Pennsylvania.
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Cited by:

  1. James M. Poterba & Steven F. Venti & David A. Wise, 2011. "The Composition and Draw-down of Wealth in Retirement," NBER Working Papers 17536, National Bureau of Economic Research, Inc.
  2. Norma L. Nielson, 2012. "Annuities and Your Nest Egg: Reforms to Promote Optimal Annuitization of Retirement Capital," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 358, August.

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