Working Paper: CEPR ID: DP5316
Authors: Monika Btler; Federica Teppa
Abstract: We use a unique dataset on individual retirement decisions in Swiss pension funds to analyze the choice between an annuity and a lump sum at retirement. Our analysis suggests the existence of an 'acquiescence bias', meaning that a majority of retirees chooses the standard option offered by the pensions fund or suggested by common practice. Small levels of accumulated pension capital are much more likely to be withdrawn as a lump sum, suggesting a potential moral hazard behaviour or a magnitude effect. We hardly find evidence for adverse selection effects in the data. Single men, for example, whose money?s worth of an annuity is considerably below the corresponding value of married men, are not more likely to choose the capital option.
Keywords: annuity choice; anomalies; lump sum; occupational pension
JEL Codes: D91; H55; J26
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| acquiescence bias (D91) | retirement decisions (J26) |
| small accumulated pension capital (D14) | choice of lump sum (G11) |
| single men (J12) | choice of lump sum (G11) |
| personal characteristics (J29) | retirement decisions (J26) |
| company-specific fixed effects (C23) | retirement decisions (J26) |