Working paper

Annuities, Bequests and Portfolio Diversification

Hippolyte d'Albis, and Emmanuel Thibault


In this article, the diversification motives of the demand for annuities is analyzed. Using a model allowing for the uncertainty of both the human life length and the interest rate, the Decision Maker is supposed to choose an optimal portfolio to maximize a bequest. Conditions under which an increase in the risk of bond returns increase the demand for annuities are proposed and discussed. Moreover, it is shown that, contrary to previous claims, more risk adversion is associated with a lower demand for annuities.


annuities; uncertain longevity; risk aversion;

JEL codes

  • D11: Consumer Economics: Theory
  • D81: Criteria for Decision-Making under Risk and Uncertainty
  • G11: Portfolio Choice • Investment Decisions
  • G22: Insurance • Insurance Companies • Actuarial Studies

Replaced by

Hippolyte d'Albis, and Emmanuel Thibault, Annuities, Bequests, and Portfolio Diversification , Journal of Public Economic Theory, vol. 12, n. 1, 2010, pp. 75–91.

See also

Published in

TSE Working Paper, n. 09-010, February 2, 2009