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Volume 64, Issue 3

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Pension Demand and Utility: The Life Annuity Puzzle

Cipra, Tomas

Year: 2014   Volume: 64   Issue: 3   Pages: 213-232

Abstract: This paper shows by means of the concept of utility that annuitization through life annui-ties or a pension can be an efficient instrument for the economic assurance of seniors. Various quantitative arguments are presented supporting this statement (e.g. annuity equivalent wealth [AEW] is calculated using Czech data). In conclusion, some practical arguments are mentioned regarding why the real demand on life annuities contradicts this result so that a so-called annuity puzzle arises in pension practice.

JEL classification: G22, G23, G28, J26, J32, H55

Keywords: annuity equivalent wealth, annuity puzzle, consumption strategy, pension demand, pension utility

RePEc: http://ideas.repec.org/a/fau/fauart/v64y2014i3p213-232.html

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