Empirical Study on the Payout Choices of Tax-Qualified Individual Annuities in Korea (세제적격 개인연금 계약자의 지급옵션 선택 분석)

Lee Kyonghee (이경희)

Empirical Study on the Payout Choices of Tax-Qualified Individual Annuities in Korea

Journal of Insurance and Finance
2013, 24(2), pp.37-69
Publisher : Korea Insurance Research Institute
Research Area : Social Science > Business Management

Lee Kyonghee ¹

¹상명대학교

Accredited

ABSTRACT

We analyze the payout choices (lump sum, annuity certain, life annuity, waiting) and determinants of annuitization in tax-qualified individual deferred annuities sold from June 1994 to December 2000 in Korea. Of the 8,402 individual annuities reaching maturity between 2008and 2011, 78.9 percent elected life annuity, 6.0 percent elected annuity certain, 4.9% percent chose lump-sum withdrawal, and the remaining 10.1 percent chose waiting. Three factors explain the high annuitization rate in the sample data: the role of public pensions and occupational pensions in the provision of old age income, behavioral factors (tax incentives and default options in the payout phase), and the price of life annuities. Among these factors, price is assumed to be a major factor. Our results from the empirical analysis show that for a female, a guarantee of the reinvestment risk increases the probability that the policyholder will choose a life annuity compared to lump-sum withdrawal. Also, an increase in accumulated assets makes it more likely an individual will choose a life annuity over the lump-sum.

KEYWORDS

determinants of annuitization, payout choices, tax-qualified individual annuities

Citation status

* References for papers published after 2023 are currently being built.

[web] / 국민연금관리공단 홈페이지 / http://institute.nps.or.kr/

[other] 국세청 / 국세통계연보

[other] / 2012 / 2012.6월말 퇴직연금 적립금 현황 분석결과 / 금융감독원 보도자료

[other] / 2002 / 개인연금 운용 현황 / 금융감독원 보도자료

[other] / 2012 / 금융소비자 리포트 제1호 (연금저축) 발간 / 금융감독원 보도자료

[journal] 김대환 / 2011 / An Analysis on Adverse Selection in Annuity Markets / 보험학회지 / 한국보험학회 (90) : 1~25

[other] 보험개발원 / 개인연금 관련 통계 자료

[other] 한국노동연구원 / 2012 / 2012 KLI 노동통계

[journal] Agnew, J. / 2008 / Who Chooses Annuities? An Experimental Investigation of the Role of Gender, Framing, and Defaults / The American Economic Review 98 : 418~422

[journal] Agnew, J. / 2003 / Portfolio Choice and Trading in a Large 401(k) Plan / The American Economic Review 93 : 193~215

[journal] Babbel, D. / 2008 / Lifetime Income for Women: A Financial Economist’s Perspective / Policy Brief: Personal Finance / Wharton Financial Institutions Center

[journal] Barsky, B. / 1997 / Preference Parameters and Behavioral Heterogeneity: an Experimental Approach in the Health and Retirement Study / Quarterly Journal of Economists 112 : 537~579

[book] Beatrice, D. / 2004 / The 2003 Individual Annuity Market: Sales and Assets / LIMRA International Inc.

[journal] Benartzi, S. / 2011 / Annuitization Puzzles / Journal of Economic Perspective 25 : 143~164

[book] Bütler, M. / 2007 / Annuities in Switzerland / The World Bank Financial Systems Department

[report] Bütler, M / 2010 / The Role of the Annuity's Value on the Decision (not) to Annuitize: Evidence from a Large Policy Change / University of St.Gallen

[report] Bütler, M. / 2010 / Payouts in Switzerland: Explaining Developments in Annuitization / University of St.Gallen

[journal] Bütler, M. / 2007 / The Choice between an Annuity and a Lump Sum:Results from Swiss pension funds / Journal of Public Economics 91 : 1944~1966

[report] Gardner, J. / 2008 / Australia's Disappearing Market for Life Annuities / Center for Pension and Superannuation, University of New South Wales

[report] Gardner, J. / 2004 / Who would buy an annuity? an empirical investigation, Watson Wyatt Technical Paper Series

[journal] Halek, M / 2001 / Demography of Risk Aversion / The Journal of Risk and Insurance 68(1) : 1~24

[journal] Hausman, A. / 1984 / Specification Tests for the Multinomial Logit Model / Econometrica 52 : 1219~1240

[journal] Hurd, M / 2006 / The Choice to Cash Out Pension Rights at Job Change or Retirement / Journal of Public Economics 90 : 2213~2227

[report] Inkmann, J. / 2007 / How Deep Is the Annuity Market Participation Puzzle?

[journal] James, E. / 2006 / The Payout Stage in Chile: Who Annuitize and Why? / Journal of Pension Economics and Finance 5(2) : 121~154

[report] James, E. / 2001 / Annuities Markets Around the World: Money's Worth and Risk Intermediation / CeRP

[report] Johnson, R. / 2004 / Annuitized Wealth at Older Ages:Evidence from the Health and Retirement Study / The Urban Institute

[book] LIMRA / 2011 / U.S. Individual Annuity Yearbook 2010

[journal] Lusardi, A / 2007 / Baby Boomer Retirement Security: The Role of Planning, Financial Literacy, and Housing Wealth / Journal of Monetary Economics 54 : 205~224

[report] Mitchell, O. / 2004 / Lessons form Behavioral Finance for Retirement Plan Design / Wharton Financial Institutions Center

[report] Previtero, A / 2011 / Stock Market Returns and Annuitization: A Case of Myopic Extrapolation / University of Western Ontario Ivey Business School

[report] Sakamoto, J. / 2010 / Annuity Markets in Japan / The Wharton School, University of Pennsylvania

[journal] Schaus, S. / 2005 / Annuities Make a Comeback / Journal of Pension Benefits 12(4) : 34~38

KJCKorea
Journal Central

Journal of Insurance and Finance 2023 KCI Impact Factor : 0.59