Abstract Means-tested retirement benefits create incentives to cash out pension wealth. Individuals trade off the advantages from annuitization, receiving longevity risk insurance, disadvantages, giving up ‘free’ wealth in form of means-tested supplemental income. We quantify impact with a calibrated life-cycle model, demonstrating that they substantially reduce desire annuitize especially for low and intermediate levels Using an administrative dataset on choices, we show model's predicted...

This paper presents new evidence on how the annuitization decision is affected by changes in annuity's value. We take advantage of an unprecendented change policy, which 2004 moderated super-mandatory Swiss occupational pension scheme: The 20 percent reduction rate at retirement capital translated into a life-long annuity equates to net present value loss approximately 20,000 SFR (20,000 US$) for average retiree. Using administrative data and correcting anticipation effects, we show that due...

Abstract Disability insurance (DI) beneficiaries lose part or all of their benefits if earnings exceed certain thresholds (“cash-cliffs”). This implicit taxation is considered the prime reason for low number who expand work and reduce benefit receipt. We analyse a conditional cash programme that incentivises related reductions disability in Switzerland. Four thousand DI received an offer to claim up CHF 72,000 (USD 77,000) they benefits. Initial reactions announcement, measured by call-back...

This paper analyzes a recent ballot in which two virtually identical popular initiatives, both demanding decrease the legal age of retirement Switzerland, led to differences approval rates nearly seven percentage points. Based on this unique natural experiment, existence emphasis framing effects is tested for and their determinants are identified outside controlled settings laboratories. Nonetheless, analyzed setting allows considerably more control than usually available field: All party,...

Switzerland is one of the few countries with long-term experience on withdrawal decisions made by retirees in fully-funded pension plans. also atypical its unusually high annuitization rates, and indeed, a majority covered mandatory occupational plans chooses an annuity at retirement. This chapter revisits historical role provision old age income, examines regulation payout phase. Recent developments both market conditions regulations are used to assess impact certain determinants decision,...

Abstract In this paper, we present new evidence for the effect of changes in annuity prices on decision to annuitize. We exploit an unprecedented change policy several Swiss occupational pension plans. There is implied 8 percent reduction rate at which retirement capital translated into annuity, and represents a net value loss CHF 18,500 (around US$ 20,000). To estimate impact change, use data from companies that changed their one large company did not. find price reduces propensity...

Abstract We analyze how taxes affect the choice between a life-long annuity and one-off lump sum payment, so-called annuitization decision. Using administrative data from large Swiss pension fund, we impute for option. show that can explain significant part of variation in rates. Exploiting kinks tax schedule sum, further find evidence optimization strategies. Our findings suggest individuals react strongly to incentives when making retirement choices.

We use a unique dataset on individual retirement decisions in Swiss pension funds to analyze the choice between an annuity and lump sum at retirement. Our analysis suggests existence of "acquiescence bias," meaning that majority retirees chooses standard option offered by pensions fund or suggested common practice. Small levels accumulated capital are much more likely be withdrawn as sum, suggesting potential moral hazard behavior magnitude effect. hardly find evidence for adverse selection...

We analyze the effect of means-tested benefits on annuitization decisions. Most industrialized countries provide a subsistence level consumption floor in old age, usually form benefits. The availability such payments creates an incentive to cash out (occupational) pension wealth for low and middle income earners, instead taking annuity. Agents trade-off advantages from annuitization, receiving wealth-enhancing mortality credit, disadvantages, giving up, “free,” supplemental find that can...