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Annuity Markets$
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Edmund Cannon and Ian Tonks

Print publication date: 2008

Print ISBN-13: 9780199216994

Published to Oxford Scholarship Online: January 2009

DOI: 10.1093/acprof:oso/9780199216994.001.0001

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Reasons for the annuity puzzle

Reasons for the annuity puzzle

Chapter:
(p.180) 8 Reasons for the annuity puzzle
Source:
Annuity Markets
Author(s):

Edmund Cannon (Contributor Webpage)

Ian Tonks (Contributor Webpage)

Publisher:
Oxford University Press
DOI:10.1093/acprof:oso/9780199216994.003.0008

This chapter discusses a variety of reasons why it may be rational to avoid full annuitization. It discusses the interaction of annuities with state pensions, deferring annuitization, expenditure patterns in retirement, and long-term care costs. It explains the different types of adverse selection that might arise in annuity markets. It stresses that the apparent dislike of annuitizing may be due to lack of comprehension or to psychological reasons that are not strictly rational.

Keywords:   adverse selection, deferring annuitization, behavioural economics, framing effects, expenditure patterns, loss aversion, psychological reasons

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