Abstract: We study the demand for retirement products given that individuals have access to innovative plans depending on the realized survival probabilities, like tontines, in addition to traditional annuities. Preferences of agents are modeled by a generalized life-cycle utility function allowing for temporal risk aversion, i.e. agents are risk averse about their lifetime. We identify conditions for pricing bounds under which agents displaying risk aversion about their lifetime prefer partial tontinization combined with partial annuitization to full annuitization. We find that temporal risk aversion can explain low demand for constant annuities and increase the demand for tontines.
(Joint work with Manuel Rach, University of St. Gallen)