Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/200321 
Year of Publication: 
2019
Series/Report no.: 
IFS Working Papers No. W19/02
Publisher: 
Institute for Fiscal Studies (IFS), London
Abstract: 
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.
Subjects: 
Annuity Puzzle
Subjective Expectations
Survival Probabilities
JEL: 
D14
D84
D91
J14
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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