If people behave rationally, why do they invest so little money in annuities? What are the reasons that people consume most when they are approximately 50 years old? In existing models the optimal behaviour is complete annuitisation and the optimal consumption exhibits a peak very late in life. The continuous life-cycle models proposed in the present thesis differ from the existing ones in that...

This paper seeks to explain why annuity purchases are postponed a later age. We consider an overlapping generations model with uncertain lifetime and two types of annuities. It is shown that, if the economy dynamically inefficient, individuals demand annuities without delay. However, it efficient, postponed. also show that these results robust several extensions.

We investigate whether a rare event (like the default of the annuity provider) can explain the annuity market participation puzzle. High risk aversion is needed to change behavior in the presence of such a disastrous shock but higher risk aversion also makes annuities more valuable. Therefore, these rare events are unlikely candidates to explain the low take-up of voluntary annuities. JEL Class...

We provide evidence that individuals optimize imperfectly when making annuity decisions, and this result is not driven by loss aversion. Life annuities are more attractive when presented in a consumption frame than in an investment frame. Highlighting the purchase price in the consumption frame does not alter this result. The level of habitual spending has little interaction with preferences fo...

In a number of countries one observes a steady decline in defined benefits pensions schemes, public or private, funded or unfunded, and a simultaneous expansion of defined contributions plans. One of the consequences of this trend is to deprive individuals at the time of their retirement from the benefit of collective annuitization. Collective annuities can be distinguished from individual ones...

We analyze and compare the impact of tax incentives and of introducing enhanced annuities on annuitization behavior considering heterogeneity among the insured. We find that tax incentives for annuitization result in a significant increase of the portion of people who should annuitize and also an increase of the insurer’s profit since less healthy individuals also annuitize, i.e. adverse select...