Should You Take a Lump-Sum or Annuitize? Results from Swiss Pension Funds

38 Pages Posted: 3 Nov 2005

See all articles by Monika Butler

Monika Butler

University of St. Gallen; CESifo (Center for Economic Studies and Ifo Institute)

Federica Teppa

Center for Research on Pensions and Welfare Policies (CeRP) - Department of Economics and Finance

Multiple version iconThere are 2 versions of this paper

Date Written: November 2005

Abstract

We use a unique dataset on individual retirement decisions in Swiss pension funds to analyze the choice between an annuity and a lump sum at retirement. Our analysis suggests the existence of an "acquiescence bias," meaning that a majority of retirees chooses the standard option offered by the pensions fund or suggested by common practice. Small levels of accumulated pension capital are much more likely to be withdrawn as a lump sum, suggesting a potential moral hazard behavior or a magnitude effect. We hardly find evidence for adverse selection effects in the data. Single men, for example, whose money's worth of an annuity is considerably below the corresponding value of married men, are not more likely to choose the capital option.

Keywords: Occupational Pension, Lump Sum, Annuity, Choice Anomalies

JEL Classification: D91, H55, J26

Suggested Citation

Bütler, Monika and Teppa, Federica, Should You Take a Lump-Sum or Annuitize? Results from Swiss Pension Funds (November 2005). CESifo Working Paper Series No. 1610, Available at SSRN: https://ssrn.com/abstract=834465

Monika Bütler (Contact Author)

University of St. Gallen ( email )

Varnbuelstr. 14
Saint Gallen, St. Gallen CH-9000
Switzerland

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Federica Teppa

Center for Research on Pensions and Welfare Policies (CeRP) - Department of Economics and Finance ( email )

Via Real Collegio, 30
Moncalieri, Torino 10024
Italy
+39 11 6476 518 (Phone)
+39 11 6403 680 (Fax)

HOME PAGE: http://cerp.unito.it/Persone/ricercatori/cv_federica_teppa.htm

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