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The Science of Flexible Retirement Choices: Switching Retirement Savings into an Annuity

Clare, A. ORCID: 0000-0002-4180-6778, Seaton, J., Smith, P. N. & Thomas, S. ORCID: 0000-0001-5438-4263 (2024). The Science of Flexible Retirement Choices: Switching Retirement Savings into an Annuity. Journal of Retirement,


In this paper we consider the choice that retirees might make between drawing down from their pension pot and the purchase of an annuity. A key finding of our research that in a world of ‘loss aversion’, across a very wide range of assumptions, there is almost always a ‘crossover point’ during retirement at which moving out of drawdown into an annuity can be the optimal strategy. This suggests that the pensions industry should investigate the construction of a hybrid, ‘flex-first, fix-later’ pension product. We show that a ‘hybrid’ approach can produce much higher levels of happiness, especially at older ages, than staying wholly in drawdown or from buying an annuity at the point of retirement.

Publication Type: Article
Publisher Keywords: Sequence Risk; Longevity Risk, Withdrawal Risk, Delayed Annuities, Adaptive Withdrawals, Residual Sum
Subjects: H Social Sciences > HF Commerce
H Social Sciences > HN Social history and conditions. Social problems. Social reform
Departments: Bayes Business School
Bayes Business School > Finance
SWORD Depositor:
[thumbnail of Flexible UK PWR vs Annuity Final.pdf] Text - Accepted Version
This document is not freely accessible due to copyright restrictions.


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