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The Effect of the Reforms to Compulsion on Annuity Demand

Author

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  • Edmund Cannon
  • Ian Tonks
  • Rob Yuille

Abstract

This paper investigates the effect of recent regulatory changes to the compulsory annuitisation of tax-privileged pension savings, on the demand for annuities and other retirement products. We find that the demand for annuities has fallen by almost 75 per cent from its peak in 2012, and the demand for income drawdown products has increased. There is some evidence that people at younger ages and with smaller pension pots are choosing not to annuitise, and hence the average size of an annuity purchase has increased.

Suggested Citation

  • Edmund Cannon & Ian Tonks & Rob Yuille, 2016. "The Effect of the Reforms to Compulsion on Annuity Demand," National Institute Economic Review, National Institute of Economic and Social Research, vol. 237(1), pages 47-54, August.
    • Handle: RePEc:sae:niesru:v:237:y:2016:i:1:p:r47-r54
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    Cited by:

    1. Blake, David & Cairns, Andrew J.G., 2021. "Longevity risk and capital markets: The 2019-20 update," Insurance: Mathematics and Economics, Elsevier, vol. 99(C), pages 395-439.
    2. Lambregts, Timo R. & Schut, Frederik T., 2020. "Displaced, disliked and misunderstood: A systematic review of the reasons for low uptake of long-term care insurance and life annuities," The Journal of the Economics of Ageing, Elsevier, vol. 17(C).
    3. Cormac O'Dea & David Sturrock, 2018. "Subjective expectations of survival and economic behaviour," IFS Working Papers W18/14, Institute for Fiscal Studies.
    4. Hazel Bateman & Ralph Stevens & Jennifer Alonso Garcia & Eduard Ponds, 2018. "Learning to Value Annuities: The Role of Information and Engagement," ULB Institutional Repository 2013/300030, ULB -- Universite Libre de Bruxelles.

    More about this item

    Keywords

    insurance markets; annuities; drawdown;
    All these keywords.

    JEL classification:

    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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