Who Annuitizes and How Do System Rules Shape These Choices? The Case of Chile

Published: 2006
Project ID: UM06-19


Annuitization is often considered socially desirable as a payout mode from pension plans, because it provides a lifelong income stream and therefore ensures that retirees will not run out of money. However, myopia and adverse selection may deter annuitization. This project examines workers’ choices during the payout stage in Chile, the only country that has had personal accounts long enough to have had substantial experience with payouts. It is expected that workers’ choices will depend on their health conditions and family health histories, information about how payouts work, degree of risk aversion, and proximity to the minimum pension guarantee, which provides public longevity insurance. Permission to use a new data set that includes all these variables for affiliates of Chile’s social security system has already been granted to the research team.