Robinson J & Comerford DA (2019) The Effect on Annuities Preference of Prompts to Consider Life Expectancy: Evidence from a UK Quota Sample. Economica. https://doi.org/10.1111/ecca.12326
State-run pensions advice websites in the UK and the US recommend considering how long the pension needs to last and offer a life expectancy calculator for this purpose. Theories make conflicting predictions regarding the effect on annuities preference of following this recommendation. We asked a quota sample of over 2,000 UK residents to choose between an annuity or cashing out their pension. Immediately prior to choice, a random subset of participants were asked how long their retirement will last; others were asked what age they will live to; others were asked what age they will die by; and a control group was not asked to consider how long the pension needs to last. Asking about life expectancy reduced preference for annuities relative to the control condition. This research suggests that the reference to life expectancy on the UK’s pension advice website exacerbates underannuitization.
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