Precautionary retirement and precautionary saving

The paper analyzes the lifetime utility maximization problem of an agent who chooses her saving and timing of retirement in the presence of labor income risk in a simple setting where a pure redistributive pension scheme is in place. In this context, a precautionary motive for retirement, which pushes old workers to replace an uncertain labor income with certain pension payments, and to retire early is identified. The conditions for precautionary retirement and saving to arise are then characterized and interpreted in two settings. In the first setting, utility only depends on income, and a sufficiently low level of absolute prudence is necessary for precautionary retirement. A sufficiently high level is necessary however for precautionary saving, which can coexist with precautionary retirement only for intermediate values of absolute prudence. In the second setting, agent utility also depends on leisure, and three conditions allow the precautionary motive for retirement and saving to jointly operate: prudence, an index of absolute prudence sufficiently low and cross-prudence in leisure.     

OCCUPATIONAL PENSIONS, WAGES, AND JOB MOBILITY IN GERMANY

Pension‐covered workers in Germany are three times less likely to change jobs than workers not covered by an occupational pension scheme. This paper examines the effects of occupational pension coverage and pension portability loss on voluntary job changes using a sample selection model with endogenous switching. The model estimates, derived from western German panel data for 1985–1998, indicate that occupational pension coverage reduces worker mobility by imposing a capital loss on those leaving their job before retirement age. Moreover, pension‐covered workers receive a higher compensation, which discourages mobility. Making pensions portable increases mobility, but from a low initial level.     

Taxes,Retirement Transfers,and Annuities*

In most countries, retirement benefits from pension saving must be taken as an annuity. By contrast, Australia allows benefits to be taken as a lump sum, and instead has recently introduced various tax incentives to encourage annuity purchase. This paper investigates the effectiveness of these tax concessions, and concludes that they do little to achieve this objective This is because they are nullified by the provisions of the broader tax and social security framework within which Australian private pension policy is set     

The choice between an annuity and a lump sum: Results from Swiss pension funds

This paper uses unique micro data from Swiss employer-based pension plans to study the annuitization decision at retirement. The administrative nature of our data, though limited with respect to individual background characteristics, allows us to analyze real choices over large retirement balances, rather than subjectively reported intentions to annuitize. We find a strong and robust impact of a utility-based measure of the annuity's value (computed within a life-cycle framework) on individual annuitization rates. Low accumulation of retirement assets is strongly associated with the choice of the lump sum, presumably due to the availability of means-tested social assistance. The sponsor's default option, in most cases the annuity, is also found to be highly influential in the decision to annuitize.     

An increase in the retirement age in China: the regional economic effects

China’s pension system is in need of comprehensive reform. One measure on which we focus is to increase the retirement age. It is likely that a change in retirement age will have significantly different effects across China’s regions. Interregional disparities are already very substantial in China and it will be important to know how changes in pension arrangements will affect disparities. We consider four policies to increase the retirement age from 60 to 61. They differ according the use made of the extra revenue generated by the policy. All four policies increase welfare and reduce the interregional welfare gap.     

延迟退休年龄与养老保险收支余额:作用机制及政策效应

文章通过连续时间养老金收支模型分析认为延迟退休年龄对养老保险计划收支余额的影响来自四个方面的效应,即缴费年限效应、领取年限效应、替代率效应和差异效应。改革的最终效果是上述四种效应共同作用的结果。短期看,前两种效应占据主导;长期看,后两种效应也具有显著影响。延迟退休年龄的政策效果和工资增长率、养老金增长率、改革速度以及未来参保人口结构有关。理论分析和实证检验结果表明,无论从改革过程还是从对养老保险计划收支余额的影响看,延迟退休年龄都是一个复杂而渐进的过程,延迟退休年龄必将减轻政府在养老保险方面负担的传统说法并不全面。     

Welfare effects of automatic-IRAs

Several states require employers who do not offer retirement benefits to automatically enroll their employees in individual retirement accounts (IRAs). We quantify the welfare effects of this program for individuals who follow a rule-of-thumb to make savings decisions. We find workers who save more than 3% would be willing to give up 0%–1.4% of lifetime consumption to avoid an IRA. We also consider a fully rational model with credit frictions, stochastic income and pre-retirement withdrawals, and costly IRA opt-outs. We find that being enrolled in an IRA is most likely to benefit workers who do not borrow during the life-cycle.     

RETIREMENT INCOME RIGHTS AS A COMPONENT OF WEALTH IN THE UNITED STATES*

Americans have accumulated a considerable amount of future purchasing power in the form of Social Security and employer pension rights. These rights are a form of wealth. In this paper, we ask how their inclusion alters the wealth portfolios of a sample of Americans at or nearing normal retirement age. Data from the 1973 wave of the longitudinal Retirement History Study suggest that, for many Americans, retirement income rights are the dominant component of wealth, and are often more important than all other entries combined, including home equity. We also find that this wealth can be seriously eroded during times of high inflation. Because of differences in marketability, pension and Social Security rights are not perfect substitutes for more liquid assets. Nonetheless, since they are so large in magnitude, and have been shown to be key determinants of the behavior of older workers, they should not be ignored.     

To defer or not defer? UK state pension and work decisions in a lifecycle model

The UK state pension (which depends only on age) includes an option to defer take up which yields either a subsequent lump sum or higher weekly pension. We analyse the joint decisions on pension deferral and intertemporal labour supply/participation in a lifecycle setting. We show that deferral is purely a financial decision, but the impact of deferral on work decisions depends on preferences, wage rates, non-labour income and initial wealth. To exactly characterize this, we use a quasilinear utility function and provide calibrated simulations. We also discuss the choice between a lump sum or increased weekly pension.     

Do the French pension reforms increase re-employment of older unemployed workers?

ABSTRACT

The sustainability of Social Security financing has pushed authorities to reform their policy to increase the labour market participation of older workers. While most of the studies have focused on the consequences of pension reform on retirement decisions, we analyse the effects of two French pension reforms, which increased the period of contribution and the minimum retirement age, on transitions out of unemployment and into employment with a difference-in-differences approach. We find that both retirement reforms have positive effects on the re-employment of older unemployed workers. The pension reforms are also accompanied by an increase of the transitions into inactivity. The results suggest that the reforms have delivered significant effects by reducing the unemployment of older workers.     

延长退休年龄还是增加缴费基数： 养老金改革的路径选择与政策效应*

随着人口老龄化加剧和预期寿命延长,我国养老保险体系面临预期养老金支付严重不足的挑战。本文基于总量视角建立基础养老金收支模型,利用中国人口预测数据,分别测算基于实施“延长退休年龄”和“增加缴费基数”两种不同的改革策略未来30年中国基础养老金的收支余额,并评估政策效果。研究结果表明,“推迟退休年龄”对缓解养老金基金支付压力作用明显,但存在增加就业压力等负外部性。“增加缴费人数”亦可以缓解养老金支付困境,且不存在负外部性,但推行时间缓慢,或将产生新的公共财政压力。     

CHANGING PENSION POLICY AND THE AGING OF AMERICA

The recently enacted Tax Reform Act of 1986 contains a number of pension policy provisions including faster vesting for private-sector, single-employer pension plans and imposing tax penalties on preretirement pension plan distributions that are not saved until retirement age. Since pensions are a long-term commitment, the impact of pension policy changes may not be fully realized for a number of years. For that reason, the effects of the Tax Reform Act's pension provisions are investigated using both short-run and long-run simulation models. Faster vesting would immediately entitle an additional 1.9 million pension plan participants to pension benefits at retirement. This increase would not, however, be translated directly into significant gains in pension recipiency for workers currently in their 50s. Nevertheless, by the time the baby boom generation retires, faster vesting and lump-sum penalties could provide more retirees with pensions and increase the standard of living of pension recipients.     

The role of personality traits in pension decisions: findings and policy recommendations

Many countries need to stimulate pension participation and contribution to ensure their citizens are prepared adequately for retirement. Identifying at-risk groups with tendencies of not joining pension plans will help governments target strategies to improve pension awareness and participation. This study investigates the role of personality traits in pension decision making using data from the UK Household Longitudinal Study. Our results demonstrate that Extraversion significantly correlates with non-participation in private pensions, including both employer run and personal pensions. Individuals who are high in Conscientiousness are more likely to participate and pay more into personal pensions. Openness to experience is negatively correlated with saving via personal pensions. Agreeableness and Extraversion correlate inversely with the amount contributed to personal plans. This paper discusses our findings in detail and offers policy implications which may help promote pension participation and ease the problem of old age poverty.     

Pension expectations,reforms and macroeconomic downturn in Italy. What can microdata tell us?

We use different years of the Bank of Italy’s Survey on Household Income and Wealth (SHIW) to explore how Italian workers’ expectations regarding their future level of pension benefits and retirement age changed from 2000 to 2014. Comparing expected and statutory values for future pension benefits and retirement ages, we find that knowledge of the pension system and its rules are not evenly distributed among workers. Some sections of the population, in particular, younger workers, women and the self-employed, are less precise in estimating their future pension benefits. As for retirement age, a large share of the working population still has not completely assimilated the implications of the linkage with the evolution of lifetime expectations at 65. Expectations in the final part of the period observed are dominated by increasing pessimism, which may be related to the macroeconomic crisis of the Italian economy and to the approval of a severe pension reform in 2011. Checking whether a household’s total wealth is consistent with lifetime consumption, we find that households where the head overestimates the future value of the pension benefit accumulate fewer resources than the remaining part of the population.     

ANNUITIZED ASSET ADEQUACY IN JAPAN: THE DEMAND FOR INDIVIDUAL PENSIONS

In this paper, I analyze the impact of social security wealth, retirement payments, and living expenses during retirement on people's retirement savings in general, and on their individual pension holdings in particular, using micro data from a 1996 Japanese household survey. I confirm a replacement effect of social security on saving for all types of households and on individual pensions for self‐employed households only. This suggests that the social security assets of self‐employed households are less than their optimal level of annuitized assets and that they would increase their demand for individual pensions if social security benefits were to be reduced.     

The Effect of Benefit Reductions on the Retirement Age: The Heterogeneous Response of Manual and Non‐Manual Workers

I estimate the effect of benefit reductions on the timing of retirement. The introduction of actuarial adjustments in the German public pension system serves as a source of exogenous variation to estimate discrete time transition rates into retirement for individuals of age 60–66. Responses to benefit reductions are elaborated separately for manual and non‐manual workers. On average, individuals postpone retirement by 13.2 months if pension benefits are reduced by 3.6 percent for each year of early retirement. This result is in line with the previous quasi‐experimental literature and suggests that people respond to the incentive of reducing the implicit tax on further periods of work. However, among men the response is about 50 percent lower for manual workers compared to non‐manual workers. Surprisingly, this does not necessarily indicate that retirement incomes of manual workers deteriorate. The explanation is that disability pensions are available at age 63—without benefit reductions.     

Should I stay or should I go? An econometric analysis of retirement decisions by couples

This article analyses retirement decisions from a household perspective, treating the retirement timing of spouses as potentially interdependent choices. To identify the determinants of retirement decisions by couples and the effects of spousal retirement, this research estimates bivariate probit models in a multi-country setting. The results show a significant joint retirement trend: both men and women are more likely to retire if their spouse already has retired. Strong asymmetric behaviours arise by gender though, with high crosscountry heterogeneity, reflecting institutional differences in both pension and public health systems.     

OLD‐AGE PENSION AND EXTENDED FAMILIES: HOW IS ADULT CHILDREN'S INTERNAL MIGRATION AFFECTED?

This article makes use of the most recent social pension reform in rural China to examine whether receipt of the pension payment equips adult children of pensioners to migrate. Employing a regression discontinuity (hereafter RD) design to a primary longitudinal survey, this article overcomes challenges in the literature that households eligible for pension payment might be systematically different from ineligible households and that it is difficult to separate the effect of pension from that of age or cohort heterogeneity. Around the pension eligibility age cutoff, results reveal large and significant increase among adult sons (but not daughters) to migrate out of their home county. Meanwhile, adult children are more likely to migrate out if their parents are healthy. Our Fuzzy RD estimations survive a standard set of key placebo tests and robustness checks. (JEL H55, I38 J14, J22)     

二次分配对城镇居民收入差距的调节效果分析——基于2007—2010年安徽省城镇住户调查数据

本文利用安徽省城镇住户调查数据探讨了二次分配对城镇居民收入差距的调节效果。研究表明,个人所得税和最低生活保障制度对收入差距的调节效果微乎其微;社会保障支出在一定程度上缩小了可支配收入的基尼系数,但是考虑到单位对住房公积金、养老保险、医疗保险的配套支出,最终的结果扩大了城镇居民的收入差距;目前,养老金和退休金对调节收入差距的效果最为显著,但是养老金和退休金的收入差距也比较大。