Unintended consequences of minimum annuity laws: An experimental study

Abigail Hurwitz*, Orly Sade, Eyal Winter

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

10 Scopus citations


The need to ensure that people have adequate savings for retirement has prompted debate among regulators and academics. Certain countries have implemented or are considering implementing mandatory minimum annuity laws (e.g., Singapore and Israel), whereas others have repealed or are considering repealing such legislation (e.g., the U.K.). We investigate the introduction as well as the repeal of a regulatory change—specifically, a mandatory minimum annuity rule—using a laboratory experiment and two surveys. Our results indicate that imposing a mandatory minimum may create an anchoring effect to the threshold level. Furthermore, our results suggest that the mandatory requirement may have unintended consequences: Such laws may fail to provide an increase in the demand for annuities and may even reduce it for certain individuals. The outcome is sensitive to the relation between the level of the mandatory minimum and anticipated consumption (i.e., future financial need). Moreover, we provide novel evidence about the consequences of a repeal of mandatory minimum annuity laws and suggest that it may not restore the demand for annuities to the pre-law level.

Original languageAmerican English
Pages (from-to)208-222
Number of pages15
JournalJournal of Economic Behavior and Organization
StatePublished - Jan 2020

Bibliographical note

Funding Information:
We have benefited from comments by Doron Avramov, Yaacov Amihud, Shlomo Benartzi, Olivia S. Mitchell, Oded Sarig, and participants at the 10th Maastricht Behavioral and Experimental Economics Symposium and the 3rd Maastricht Behavioral Economic Policy Symposium 2017, the Second Coller Incentives and Behavior Change Conference (CCBE), IAREP 2017—Leveraging Behavioral Insights, the Second Showcasing Women in Finance Conference, Miami, March 2018, Seminar on Aging, Retirement and Pensions: Trends, Challenges and Policy, Ashkelon, March 2018, the 2018 ESA meeting Berlin, Pension reforms, behavioral perspectives on pensions workshop, Berlin, 2018 Norms and Behavioral Change Workshop, University of Pennsylvania, SEA 88th Annual Meetings, Washington, DC, November 2018, the Third Israel Behavioral Finance Conference, June 2019, First Annual meeting–LACEA BRAIN, Washington DC, June 2019, Experimental Finance Conference, Copenhagen, June 2019, and seminar participants at the Hebrew University, Bar Ilan University, College of Management Academic Studies, Israel, Bank of Israel, Haifa University, Free University of Berlin, the Center for Retirement Research at Boston College, the Wharton School and University of Utah. The authors wish to express their gratitude for the financial support provided for this research from the Israel Science Foundation (ISF 1929/17), the National Insurance Institute of Israel, the Maurice Falk Institute for Economic Research in Israel, the Krueger Center of Finance at the Hebrew University (Sade), and the Research Authority of the College of Management Academic Studies, Rishon Lezion, Israel, (Hurwitz). Sade thanks the Stern School of Business at New York University for support and hospitality. Hurwitz wishes to thank the Bogen fellowship for supporting her research.

Publisher Copyright:
© 2019


  • Anchoring
  • Household finance
  • Mandatory annuity


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