Doctoral Degrees (Business Management)

Permanent URI for this collection

https://scholar.sun.ac.za/handle/10019.1/696

Browse

Browsing Doctoral Degrees (Business Management) by Author "De Villiers-Strijdom, Jeannie"

Now showing 1 - 1 of 1
  • Thumbnail Image
    Item
    Annuity decision-making
    (Stellenbosch : Stellenbosch University, 2021-03) De Villiers-Strijdom, Jeannie; Krige, J. D. (Jacob Daniel); De Villiers, Johann U.; Stellenbosch University. Faculty of Economic and Management Sciences. Dept. of Business Management.
    ENGLISH SUMMARY : As a standard practice, retirement capital is converted into a subsequent income stream. There are two main annuity income products to choose from, namely: (i) a guaranteed/life annuity (or annuitisation); and (ii) a living annuity (or self-annuitisation). The former guarantees an annuity income for life, whereas the latter exposes capital to volatile investment returns, with the possible danger of depletion before death, especially in the wake of excessive withdrawals. The world-wide phenomenon of reticence among retirees to protect themselves against longevity risk, is an annuity puzzle that has been the subject of vigorous academic debate. This study investigated the factors that relate to individuals’ annuity perceptions, intention and satisfaction. Based on existing literature in this field, a theoretical framework is presented with respect to the annuity puzzle, on the basis of which two questionnaires are designed as measurement instruments, namely: (i) a questionnaire for employees who are members of various retirement funds in order to ascertain the factors that relate to annuity perception and intention; and (ii) a questionnaire for pensioners, in order to measure their satisfaction levels that relate to the eventual outcome of their annuity choice. Based on an investigation into the factors that relate to annuity decision-making, the principal conclusions of this study are: (i) a bias towards self-annuitisation before retirement is mainly related to investor confidence in earning an above-average income based on the capital growth generated by the underlying capital, although the accompanying issues with respect to managing these investments often prove problematic; (ii) the bequest motive, which refers to the desire to leave retirement capital to heirs, often results in an unjustified belief in living annuity desirability, with the possible negative outcome of outliving retirement capital and facing poverty in retirement, the result of which could lead to dependency on the state or family members; (iii) a substantial impact on individuals’ perception and intention to annuitise, is the expectation of a predictable and consistent annuity income stream, without continuous involvement in investment decision-making; (iv) trust in the integrity of financial advisors significantly relates to individuals’ annuity perceptions and intentions. Finally, this study presents a new annuity decision-making tool, consisting of two questionnaires and user’s manuals, to be used by benefit counsellors and financial advisors, in guiding their clients with respect to their choice of an optimal annuity income option. In summary, this study therefore provides further insights into the intriguing annuity puzzle.