Pricing annuities: The role of taxation in retirement decisions

Konferenzbeitrag

This paper investigates the role of taxation in individual annuitization decisions by exploiting differences in relative taxation between the one-off lump sum payment and the life-long annuity. In a first step taxes are imputed for both the lump sum and the annuity for each individual whose retirement choice is recorded in an administrative dataset from a large Swiss pension fund. Using a variety of measures of taxation we show that taxes can explain a significant part of the variation in annuity rates. Furthermore, exploiting kinks in the tax schedule within a regression discontinuity framework we find evidence for tax optimization strategies by individuals. The results of this paper suggest that individuals react strongly to tax incentives when making retirement choices.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Beiträge zur Jahrestagung des Vereins für Socialpolitik 2016: Demographischer Wandel - Session: Demographic Change and the Macroeconomy II ; No. D24-V3

Classification and Topics

• Classification: Wirtschaft ; Micro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making‡ ; Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes ; Retirement; Retirement Policies

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Bütler, Monika ; Ramsden, Alma
• Event: Veröffentlichung
• (who): ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften, Leibniz-Informationszentrum Wirtschaft
• (where): Kiel und Hamburg
• (when): 2016

Further information

• Handle: http://hdl.handle.net/10419/145525
• Last update: 10.03.2025, 11:45 AM CET