The Demand for Annuities

This chapter combines a commitment to understanding the nature and scope of decision-making with the realization that changing economic circumstances, filtered through individual attributes, can make a difference to decision-making. Through an analysis of the intended take-up (or not) of annuities at different ages postretirement, it is shown that social status and identity interact with geographical location to produce highly differentiated maps of personal initiative. This study was cast in the aftermath of the 2000/1 stock market crash (post-9/11) and sought to test observed responses against continuing debate over the putative value of annuities for defined contribution pension plan participants. It was found that the UK map of private pension benefits is significantly related to social status, and that the intended take-up of an annuity is significantly related to the region of residence of respondents; there is, in effect, a UK map of risk (and non-risk) cultures, such that reliance upon financial markets systematically varies by region. As we note, the purchase of an annuity for postretirement is a very contentious issue, especially for those who might be obliged to make a compulsory purchase, either by reason of public policy or scheme rules. We show, moreover, that people’s preferences change as they age, such that there are very different responses post-70 years of age.