2004
Volume 25, Issue 1
  • ISSN: 0169-2216
  • E-ISSN: 2468-9424

Abstract

Financial incentives and preferred pension age

Financial incentives and preferred pension age

In view of the changing age composition of the Dutch labour force it is deemed essential that people continue to work till higher ages than they currently do. This may be achieved by changing the financial incentives in pension schemes. Two well-known mechanisms from economic theory apply. Firstly, lower pensions may, through an income effect, induce people to postpone retirement. Secondly, a substitution effect is at work if retiring at later ages is made financially more attractive relative to retiring at earlier ages.

In this article we use a stated preference approach in order to study the effect of financial incentives on the retirement decision of workers. For that purpose we have asked participants of the CentERpanel at what age they would retire if they had to choose from a plausible range of retirement options. The choice options differ between respondents, reflecting different combinations of substitution and income effects. Regarding the decision to fully stop working at some age, workers appear to be responsive to both types of incentives, albeit more so to the substitution effect. If retirement is gradual, by a stepwise reduction of working hours, the difference between both types of incentives is small.

Loading

Article metrics loading...

/content/journals/10.5117/2009.025.001.003
2009-03-01
2022-01-22
Loading full text...

Full text loading...

http://instance.metastore.ingenta.com/content/journals/10.5117/2009.025.001.003
Loading
This is a required field
Please enter a valid email address
Approval was a Success
Invalid data
An Error Occurred
Approval was partially successful, following selected items could not be processed due to error