Attitudes towards the annuity puzzle in longevity risk management — findings from focus studies
Attitudes towards the annuity puzzle in longevity risk management — findings from focus studies

Summary/Abstract: The ongoing demographic changes present many challenges to modern pension systems, particularly in Poland, where supplementary savings mechanisms have been introduced to increase future retirement benefits. While annuities are the only instruments guaranteeing protection against longevity risk, their adoption remains limited. This phenomenon is known as the "annuity puzzle." Our study examines Polish pre-retirees' attitudes toward annuitisation, focusing on behavioural and contextual factors influencing decisions about pension capital distribution. The research is based on focus groups with participants from academic environment aged 50 and above. Findings highlight low economic awareness, limited understanding of annuities, and a preference for flexible capital management. Key deterrents to annuity adoption include risk aversion, inheritance motives, and a distrust of financial mechanisms. Behavioural insights reveal loss aversion, with participants perceiving the potential loss from early death outweighing the benefits of longevity protection. The study underscores the importance of tailored financial education and independent pension advisory services. It advocates for a gradual annuitisation model that balances flexibility with security, addressing psychological barriers and financial realities. The results also call for systemic interventions, including behavioural nudge and simplified communication from financial institutions, to foster a viable market for annuities in Poland.

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