pension incentives to retire
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Pension incentives to retire . Edward Whitehouse Slovenia, June 200 7. Agenda. When can people retire? Retirement incentives Sensitivity analysis Policy implications. Normal pension age. USA. DNK. GBR. IRL. NLD. POL. CYP. DEU. AUT. FIN. ESP. SWE. BEL. ITA. JPN. LUX. GRC. - PowerPoint PPT PresentationTRANSCRIPT
Pension incentives to retire
Edward Whitehouse
Slovenia, June 2007
Agenda
When can people retire? Retirement incentives Sensitivity analysis Policy implications
Normal pension age
55 56 57 58 59 60 61 62 63 64 65 66 67FRAMLTSVKHUNESTCZELATLIT
SVNPRTGRCLUXJPNITA
BELSWEESPFIN
AUTDEUCYPPOLNLDIRL
GBRDNKUSA
Pension eligibility agefor men
Normal pension age
55 56 57 58 59 60 61 62 63 64 65 66 67FRAMLTSVKHUNESTCZELATLIT
SVNPRTGRCLUXJPNITA
BELSWEESPFIN
AUTDEUCYPPOLNLDIRL
GBRDNKUSA
Pension eligibility agefor men
Normal pension age: women
55 56 57 58 59 60 61 62 63 64 65 66 67FRAMLTSVKHUNESTCZELATLITSVNPRTGRCLUXJPNITABELSWEESPFINAUTDEUCYPPOLNLDIRLGBRDNKUSA
Pension eligibility agefor women
Retirement windows
55 56 57 58 59 60 61 62 63 64 65 66 67FRAMLTSVKHUNESTCZELATLIT
SVNPRTGRCLUXJPNITA
BELSWEESPFIN
AUTDEUCYPPOLNLDIRL
GBRDNKUSA
Pension eligibility age(early/normal) for men
Retirement duration
10 12.5 15 17.5 20 22.5 25 27.5 30FRAMLTSVKHUNESTCZELATLIT
SVNPRTGRCLUXJPNITA
BELSWEESPFIN
AUTDEUCYPPOLNLDIRL
GBRDNKUSA Average: 17.7 years
Additional life expectancy at normal pension age, men, 2004 Eurostat data
Retirement duration: men, 2004
10 12.5 15 17.5 20 22.5 25 27.5 30FRAMLTSVKHUNESTCZELATLIT
SVNPRTGRCLUXJPNITA
BELSWEESPFIN
AUTDEUCYPPOLNLDIRL
GBRDNKUSA Average: 19.9 years
Additional life expectancy at normal and early pension ages, men, 2004 Eurostat data
Measuring incentives to retire
Relationship between incomes in and out of work: out of work: retirement pension in work: earnings ratio of the two is the conventional ‘replacement rate’
But extra work can give extra pension entitlement Captured by the ‘change in pension wealth’ from
working longer pension wealth is present value of future pension receipts an implicit tax/subsidy on remaining in work
Level of pension wealth also matters Focus on age 60-64
Change in pension wealthAge 60-64, average earner, entry at 25
-50
-25
0
25
50
LUXHUN
NLDESP
POLAUT
FINDEU
CZEJPN
ESTDNK
SVKGBR
IRLLAT
FRAITA
SVNLIT
CYPUSA
PRTSWE
BELGRC
MLT
Annualised;per cent of annual earnings
Level of pension wealthAge 60, average earner, entry at 25
0
5
10
15
20
GBRJPN
IRLUSA
POLLIT
DEULAT
SVKEST
BELFIN
CZEFRA
SWECYP
DNKITA
AUTHUN
PRTSVN
NLDESP
LUXGRC
MLT
Pension wealth at age 60, multiple of annual earnings
Pension wealth: changes and levels
Change in pension wealth, working age 60-64 Lowest third Middle third Highest third
Lowest Lithuania, United States
Ireland, Japan, Latvia, Slovakia, UK
Germany, Poland
Middle Belgium, Cyprus, Sweden
Denmark, Estonia, France, Italy
Czech Republic Finland
Leve
l of p
ensi
on w
ealth
at
age
60
Highest Greece, Malta, Portugal, Slovenia
Austria, Hungary, Luxembourg, Netherlands, Spain
Conclusions – incentives Early retirement permitted with low (e.g. Hungary, Portugal) or zero
(e.g. Belgium, Greece, Luxembourg) reduction in benefits Zero or too small increments for people deferring retirement
(e.g. France, Slovenia, Spain)
Earnings tests that prevent people combining work and pension (e.g. Belgium, Ireland, Malta, Luxembourg)
Systems that require contributions even when little or no extra benefit is earned (e.g. maximum number of years in Belgium, Greece, Spain, United States)
Resource tests can encourage retirement at earliest opportunity for low earners (e.g. France, Portugal, Sweden)
Benefit formulae with higher pension accruals at younger ages (e.g. Spain) or pensions based of ‘final’ or ‘best’ earnings, which encourage people to retire once pay has peaked (e.g. Greece, Spain)
Contact information
Edward Whitehouse +33 1 45 24 80 79 [email protected]
ELS/SPDOECD2 rue Andre PascalParis 75775 Cedex 16France
Internet: www.oecd.org/social/ageing/PaG