Framing and the annuitization decision

Experimental evidence from a Dutch pension fund

Christian Bockweg, Eduard Ponds, O.W. Steenbeek, Joyce Vonken

Research output: Contribution to journalArticleScientificpeer-review

Abstract

We report the effects of framing settings in annuity demand after conducting a survey-based experiment with members of a Dutch occupational pension plan. We gave participants the option to allocate up to 20% of their projected pension accrual to a 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 effects in annuity demand. Framing effects remain significant when we control for individual characteristics. We also find robust evidence of individual characteristics influencing annuity demand, highlighting the importance of heterogeneity among participants, for example risk aversion, time preference and trust in the pension fund. Gender and long-term debt positions have significant impact how one responds to framing. We conclude that Dutch plan members generally welcome the partial lump sum option over mandatory full annuitization. The application of frames appears to predictively steer annuity demand. The precise effect framing may have, would probably also depend on the institutional environment, which predefines the perspective through which individuals filter annuities.
Original languageEnglish
Pages (from-to)385-417
JournalJournal of Pension Economics and Finance
Volume17
Issue number3
DOIs
Publication statusPublished - Jul 2018

Fingerprint

Annuitization
Pension funds
Annuities
Framing effects
Individual characteristics
Long-term debt
Pension plans
Experiment
Risk aversion
Pensions
Time preference
Occupational pension
Institutional environment
Filter

Cite this

Bockweg, Christian ; Ponds, Eduard ; Steenbeek, O.W. ; Vonken, Joyce. / Framing and the annuitization decision : Experimental evidence from a Dutch pension fund. In: Journal of Pension Economics and Finance. 2018 ; Vol. 17, No. 3. pp. 385-417.
@article{27655f4120a042769ad93a198d2fdccb,
title = "Framing and the annuitization decision: Experimental evidence from a Dutch pension fund",
abstract = "We report the effects of framing settings in annuity demand after conducting a survey-based experiment with members of a Dutch occupational pension plan. We gave participants the option to allocate up to 20{\%} of their projected pension accrual to a 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 effects in annuity demand. Framing effects remain significant when we control for individual characteristics. We also find robust evidence of individual characteristics influencing annuity demand, highlighting the importance of heterogeneity among participants, for example risk aversion, time preference and trust in the pension fund. Gender and long-term debt positions have significant impact how one responds to framing. We conclude that Dutch plan members generally welcome the partial lump sum option over mandatory full annuitization. The application of frames appears to predictively steer annuity demand. The precise effect framing may have, would probably also depend on the institutional environment, which predefines the perspective through which individuals filter annuities.",
author = "Christian Bockweg and Eduard Ponds and O.W. Steenbeek and Joyce Vonken",
year = "2018",
month = "7",
doi = "10.1017/S147474721700018X",
language = "English",
volume = "17",
pages = "385--417",
journal = "Journal of Pension Economics and Finance",
issn = "1474-7472",
publisher = "CAMBRIDGE UNIV PRESS",
number = "3",

}

Framing and the annuitization decision : Experimental evidence from a Dutch pension fund. / Bockweg, Christian; Ponds, Eduard; Steenbeek, O.W.; Vonken, Joyce.

In: Journal of Pension Economics and Finance, Vol. 17, No. 3, 07.2018, p. 385-417.

Research output: Contribution to journalArticleScientificpeer-review

TY - JOUR

T1 - Framing and the annuitization decision

T2 - Experimental evidence from a Dutch pension fund

AU - Bockweg, Christian

AU - Ponds, Eduard

AU - Steenbeek, O.W.

AU - Vonken, Joyce

PY - 2018/7

Y1 - 2018/7

N2 - We report the effects of framing settings in annuity demand after conducting a survey-based experiment with members of a Dutch occupational pension plan. We gave participants the option to allocate up to 20% of their projected pension accrual to a 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 effects in annuity demand. Framing effects remain significant when we control for individual characteristics. We also find robust evidence of individual characteristics influencing annuity demand, highlighting the importance of heterogeneity among participants, for example risk aversion, time preference and trust in the pension fund. Gender and long-term debt positions have significant impact how one responds to framing. We conclude that Dutch plan members generally welcome the partial lump sum option over mandatory full annuitization. The application of frames appears to predictively steer annuity demand. The precise effect framing may have, would probably also depend on the institutional environment, which predefines the perspective through which individuals filter annuities.

AB - We report the effects of framing settings in annuity demand after conducting a survey-based experiment with members of a Dutch occupational pension plan. We gave participants the option to allocate up to 20% of their projected pension accrual to a 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 effects in annuity demand. Framing effects remain significant when we control for individual characteristics. We also find robust evidence of individual characteristics influencing annuity demand, highlighting the importance of heterogeneity among participants, for example risk aversion, time preference and trust in the pension fund. Gender and long-term debt positions have significant impact how one responds to framing. We conclude that Dutch plan members generally welcome the partial lump sum option over mandatory full annuitization. The application of frames appears to predictively steer annuity demand. The precise effect framing may have, would probably also depend on the institutional environment, which predefines the perspective through which individuals filter annuities.

U2 - 10.1017/S147474721700018X

DO - 10.1017/S147474721700018X

M3 - Article

VL - 17

SP - 385

EP - 417

JO - Journal of Pension Economics and Finance

JF - Journal of Pension Economics and Finance

SN - 1474-7472

IS - 3

ER -