Factors influencing annuity demands. An empirical study based on the Netherlands

Since people are expected to live longer which means they will have a longer retirement period, how to protect retirees from poverty has become an important public issue discussed widely. Annuity is such an insurance policy that pays their beneficiaries as long as beneficiaries are alive. It is playing an increasingly important role in retiree’s retirement arrangement, especially under the trend of pension reform in the first and second pillar. So it is urgent to understand the determinants of annuity demands. This paper uses Dutch Household Survey data to investigate the factors influencing people’s decisions to purchase annuities. We find strong impacts of gender, health, longevity expectation, wealth and corporate pension coverage on annuitization decisions. However, the influences of bequest motive, discount rate, risk averse and financial literacy is not as significant as expected.