The aim of this project, which is jointly funded by the NAPF and ESRC, is to examine, theoretically and empirically, some key questions relating to individual engagement with the annuity market. This programme of work focuses on the decumulation stage of pension saving – in particular, examining annuitisation decisions – which has been relatively under-researched compared to the accumulation phase.

The main objectives of this work are:

• To understand better how people make annuitisation decisions at and around retirement;
• To shed more light on how consumption patterns develop through retirement

In doing that we will look at how these decisions depend upon wealth at retirement and expectations of income and needs.

The work informs an increasingly important policy area. The ongoing decline in the prevalence of defined benefit pension schemes among private sector employers means that those approaching retirement are increasingly reliant on funds accrued in defined contribution (DC) pensions to provide them with an income stream in retirement. The introduction of auto-enrolment for most employees over the next few years is also likely to increase the number of people who hold some funds in DC schemes. How much income individuals receive from their DC pensions depends not only on the amount they contributed, the investment choices they made, and the charges they faced, but also crucially on the decisions they make when they come to buy an annuity. However, annuitisation requires individuals to negotiate a complex set of decisions, including what type of annuity to purchase and from whom. The annuity market is diverse and fragmented and therefore offers annuitants a lot of choice but also, therefore, a lot of complexity.