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Title:The role of the annuity's value on the decision (not) to annuitize: evidence from a large policy change PDF Logo
Authors:Bütler, Monika
Staubli, Stefan
Zito, Maria Grazia
Issue Date:2008
Series/Report no.:CESifo working paper 2376
Abstract:This paper presents new evidence on how the annuitization decision is affected by changes in the annuity's value. We take advantage of an unprecendented change in policy, which in 2004 moderated the super-mandatory Swiss occupational pension scheme: The 20 percent reduction in the rate at which retirement capital is translated into a life-long annuity equates to a net present value loss of approximately 20'000 SFR (20'000 USD) for the average retiree. Using administrative data and correcting for anticipation effects, we show that due to the change in policy there was an approximately 8 percentage point change in the share of men choosing to annuitize their savings. We also show that the estimated responsiveness of the cash-out decision to variations in a utility based measure for the annuity value is comparable to results of previous studies, which employed completely different sources of variation in the annuity's value.
Subjects:Annuity puzzle
occupational pension
policy change
JEL:D91
H55
J26
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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