Preferences for deferred annuities in the Japanese retirement market
Journal of Financial Economic Policy
ISSN: 1757-6385
Article publication date: 15 June 2021
Issue publication date: 22 November 2021
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.
Keywords
Acknowledgements
The authors are thankful for the helpful comments from Hirofumi Kurokawa and Kazutoshi Tashiro, as well as from participants at the 11th annual conference of the Association of Behavioral Economics and Finance, 26th Nippon Finance Association Annual Conference and 2018 Southern Economic Association Annual Conference. This study was financially supported by the Health and Labor Sciences Research Grant of Japan (H29-Policies-General-002). Tomoki Kitamura and Kunio Nakashima declare that they have no conflict of interest.
Citation
Kitamura, T. and Nakashima, K. (2021), "Preferences for deferred annuities in the Japanese retirement market", Journal of Financial Economic Policy, Vol. 13 No. 6, pp. 810-830. https://doi.org/10.1108/JFEP-06-2020-0138
Publisher
:Emerald Publishing Limited
Copyright © 2021, Emerald Publishing Limited