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Preferences for deferred annuities in the Japanese retirement market

Author

Listed:
  • Tomoki Kitamura
  • Kunio Nakashima

Abstract

Purpose - Deferred annuities, which offer longevity insurance with relatively low premiums, are a potential payout option in defined contribution (DC) pension plans in Japan. This study aims to measure individual preferences for these annuities. Design/methodology/approach - This study conducts stated choice experiments using an original internet survey. This methodology provides a decision-making scenario similar to that faced by individuals when making real retirement saving decisions. Subjective valuations of deferred, immediate and term annuities are compared. Findings - This study finds that male individuals have an insignificant preference for deferred annuities – the benefits of which begin at an advanced age. On average, deferred annuities are considered a gamble, betting against life and individuals who are married and have higher financial assets tend to value them less. Originality/value - While previous studies, based on theory and simulations, have found that deferred annuities should be included in individual retirement assets, this study examines annuity preferences from the demand side (i.e. DC plan participants) –an approach that has not been addressed in the literature.

Suggested Citation

  • Tomoki Kitamura & Kunio Nakashima, 2021. "Preferences for deferred annuities in the Japanese retirement market," Journal of Financial Economic Policy, Emerald Group Publishing Limited, vol. 13(6), pages 810-830, June.
    • Handle: RePEc:eme:jfeppp:jfep-06-2020-0138
    DOI: 10.1108/JFEP-06-2020-0138
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    More about this item

    Keywords

    Deferred annuity; Retirement market in Japan; Stated choice experiment; Subjective valuation; Insurance; Behavioral economics; National government expenditures and related policies; Personal finance; Saving; G52; G22; D14;
    All these keywords.

    JEL classification:

    • G52 - Financial Economics - - Household Finance - - - Insurance
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance

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