INTRODUCTION

This chapter begins by elaborating on the general arguments that Chapter 5 advances as to why general rules, and not individual preferences should govern the extent of annuitization of account balances, and considers what form distributions should take. It then turns to address various issues that mandatory annuitization entails for the safety net. These include the merits of a guarantee on annuity balances, the distributional effects of a carve-out reform, and the implications of reform for family benefits and the disability pension. This chapter also briefly discusses some legal issues that arise with the creation of individual accounts, since they have a bearing on family benefits. This chapter concentrates on those issues that could arise with mandatory annuitization regardless which sector provides the annuities. Chapter 7 addresses the additional issues that private provision entails.

THE SCOPE FOR RESPECTING INDIVIDUAL PREFERENCES

Most people could benefit from the annuitization of at least part of their wealth when they retire. The question is how much. The case for annuitization is the strongest for people who either have little annuitized wealth to begin with, or would have problems managing their expenditure without the discipline that annuitization provides. As Chapter 5 argued, the case is weak for an account holder whose wealth is already highly annuitized. It is also weak for some one who is relatively well off and able to manage a budget.