Framing and the annuitization decision: Experimental evidence from a Dutch pension fund

  • Christian Bockweg Christian Bockweg
  • Eduard Ponds Eduard Ponds
  • Joyce Vonken Joyce Vonken
  • Onno Steenbeek Onno Steenbeek

We report the effects of framing and default settings in annuity demand after conducting a survey-based experiment with over 3,000 members of a Dutch occupational pension plan. The participants were asked to allocate their real projected pension accrual between a life annuity and a partial lump sum. In particular, we investigated the joint effects of consumption and investment frames and gain and loss frames. We present strong evidence for framing and default setting effects in annuity demand. We also find robust evidence of individual characteristics of influence annuity demand, highlighting the importance of heterogeneity among participants. Framing and default effects remain significant when we control for individual characteristics. We conclude Dutch plan members generally welcome the partial lump sum option over full annuitization. Framing and default settings are generally capable of predictively steering annuity demand. The precise effect framing may have also depends on the institutional environment, which predefines the perspective through which individuals filter annuities.

Netspar, Network for Studies on Pensions, Aging and Retirement, is a thinktank and knowledge network. Netspar is dedicated to promoting a wider understanding of the economic and social implications of pensions, aging and retirement in the Netherlands and Europe.

MORE ABOUT NETSPAR


Mission en strategy           •           Network           •           Organisation           •          Magazine
Netspar Brief            •            Actionplan 2015-2019           •           Researchagenda

ABOUT NETSPAR

Our partners

B20160708_achmea
B20160708_universiteit leiden
B20160708_asr
B20160708_erasmus
B20160708_tilburg university
View all partners