How sensitive are retirement decisions to financial incentives: A stated preference analysis
Due to the high financial pressure on pension systems at the moment, many industrialized countries have to adapt their pension systems. The reforms applied by these countries, however, differ greatly. Itis, therefore, of great importance to know the effects of different types of pension reforms. This paper investigates the effects of two pension reforms by using stated preference data (The ABP representative survey 2013 and administrative data). Participants of this questionnaire are asked to state their expected retirement age for several hypohetical pension systems. The pension systems are designed such that a price effect, caused by an increase of the implicit tax on early retirement by 2 and 4 percentage points, andan income effect, caused by a drop of pension wealth by 7 and 14 percentage points, can be estimated.The results of this paper show that a decrease of someones pension wealth by 7 and 14 percentage points results in an average retirement postponement of 7 and 14 months, respectively. An increase ofthe implicit tax on early retirement by 2 and 4 percentage points leads to an increase in the average expected retirement age by 5 and 9.5 months, respectively. The results also show that several socio-economic variables have significant effects on the overall retirement age and on the size of the effects of the pension reforms. This paper also investigates whether the pension reforms have different effectson early retirement and late retirement. The results show that the price effect depends on the current retirement age, since the price effect is significant on early retirement, but insignificant on late retirement.We also find that the effects of the socio-economic variables on early retirement differ from the effects of the socio-economic variables on late retirement.