Life expectancy calculators could be putting people off choosing an annuity, new research has suggested.
While the finding appears counter-intuitive, economists at Stirling Management School have found that among 2,000 people, using a life expectancy calculator offered by the likes of the government’s guidance service MAPS made them less likely to opt for a guaranteed income afterwards.
Many would have thought that showing people how long they had to make their money last would lead them towards security, but that was not the case.
Nearly three quarters of a control group bought an annuity, but this figure fell 8 percentage points to 65 per cent if they used a life expectancy calculator beforehand.
More consumers also said making a bequest was the most significant factor behind their decisions if they had used the calculator first.
The Times reports Stirling behavioural economist David Comerford’s calls for MAPS to remove the calculator from its website.
Comerford says: “We thought it would increase the uptake for annuities. In fact it had the opposite effect. Nothing in conventional economics seems to explain it.”
A MAPS spokeswoman tells the paper: “Encouraging people to think about how long they might live after they finish work is an important part of the retirement planning process.”
MAPS adds that FCA data shows taking guidance first leads more consumers to pick annuities, and fewer to opt for cash options.
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