Survival pessimism and the demand for annuities

Arbeitspapier

The "annuity puzzle" refers to the fact that annuities are rarely purchased despite the longevity insurance they provide. Most explanations for this puzzle assume that individuals have accurate expectations about their future survival. We provide evidence that individuals mis-perceive their mortality risk, and study the demand for annuities in a setting where annuities are priced by insurers on the basis of objectively-measured survival probabilities but in which individuals make purchasing decisions based on their own subjective survival probabilities. Subjective expectations have the capacity to explain signi cant rates of non-annuitization, yielding a quantitatively important explanation for the annuities puzzle.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IFS Working Papers ; No. W19/02

Classification and Topics

• Classification: Wirtschaft ; Household Saving; Personal Finance ; Expectations; Speculations ; Micro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making‡ ; Economics of the Elderly; Economics of the Handicapped; Non-labor Market Discrimination
• Subject: Annuity Puzzle ; Subjective Expectations ; Survival Probabilities

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): O'Dea, Cormac ; Sturrock, David
• Event: Veröffentlichung
• (who): Institute for Fiscal Studies (IFS)
• (where): London
• (when): 2019

Further information

• DOI: doi:10.1920/wp.ifs.2019.0219
• Handle: http://hdl.handle.net/10419/200321
• Last update: 10.03.2025, 11:43 AM CET