Consequences of further increasing the pension age

MOTIVATION

By 2021, the state pension age will have increased to 67. Due to being linked to the remaining life expectancy after the age of 65, the state pension age is set to rise to 71.5 by 2060, according to current prognoses. According to a number of studies, however, healthy life expectancy rises slower than normal life expectancy. What are the long-term implications of this? Are we creating a new peak in terms of invalidity? Will there be more poverty when people reach the retirement date? What are the consequences when life expectancy suddenly increases faster than was anticipated?

STUDY DESIGN

In the course of this project, we will study the development of the various definitions of healthy life expectancy, focusing on people aged 65 and older. The central question is how the different health standards relate to the ability to work. Extrapolations have been made before, showing that the number of people with health limitations will increase (Fontijn and Deeg, 2016). However, not every illness or physical limitation means a person is ready for retirement. Wubulihasimu et al. (2015) for instance, have only been able to find a weak relationship between health limitations and labor market participation. We explore various data sources that can provide a better insight into the link between the different health standards and the actual efflux due to invalidity. We prefer to use micro data from Statistics Netherlands [CBS] but the CentERpanel, for instance, also contains potentially informative modules about health and work.

Special attention should be devoted to the spread in healthy life expectancy. As long as the average life expectancy is higher than the retirement age, that retirement age is, on average, feasible. The question, however, is how many people develop serious or prohibitive health issues before their retirement age. And is it possible to use trend-based developments to predict if and to what extent this group will grow along with an increase of the pension age? Ayuso et al. (2016), for instance, describe a large and rising heterogeneity in life expectancy according to income during the course of life.

The project also provides a brief reference list of relevant studies into projected life expectancy, health and labor participation (Majer et al., 2013; Wouterse et al., 2015) and into the interaction between health and working on beyond retirement age (see, De Grip et al., 2012, for example). In addition, it focuses on the impact of wear and tear, caused by physically demanding professions (Ravesteijn et al., 2013). What kind of policy can contribute to better working conditions or successful job transitions later in life with a view to reducing future absence through illness?

RESEARCH QUESTIONS

  • What is the development of healthy life expectancy both in terms of average and the spread around the average? How do the various standards for healthy life expectancy relate to each other?
  • What is the anticipated development of the percentage of persons who are unable to work before they reach pension age? Which health standard is the most predictable in that respect?
  • What do we know about the relationship between work and health/invalidity according to age? And what is the impact of factors such as gender, income and the level of education?
  • What are examples of best practices and policy options to reduce early absence through illness in physically demanding professions?

Netspar, Network for Studies on Pensions, Aging and Retirement, is een denktank en kennisnetwerk. Netspar is gericht op een goed geïnformeerd pensioendebat.

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