Early Retirement Behaviour in the Netherlands: Evidence From a Policy Reform

Abstract

In the early 1990s, the Dutch social partners agreed upon transforming the generous and actuarially unfair PAYG early retirement schemes into less generous and actuarially fair capital funded schemes. The starting dates of the transitional arrangements varied by industry sector. In this study, we exploit the variation in starting dates to estimate the causal impact of the policy reform on early retirement behaviour. We use a large administrative dataset, the Dutch Income Panel 1989−2000, to estimate hazard rate models for early retirement. We conclude that the policy reform induced workers to postpone early retirement. In particular, both the price effect (reducing implicit taxes) and the wealth effect (reducing early retirement wealth) are shown to have a positive impact on the early retirement age. Yet, we show that model specifications including the most commonly used financial incentive measures are open to further improvements, given that these are outperformed by a simple specification with dummy variables.

The effects of pension rights and retirement age on training participation: Evidence from a natural experiment

“…This favorable tax treatment created a substantial advantage due to the progressive tax system (Euwals et al, 2006 In response to the abolishment of the tax treatment on January 1, 2006, the pension fund of the Dutch public sector (ABP) dramatically changed its pension plan (now called 'ABP flexible pension plan') for workers born in 1950 or later and for those who had not been working continuously in the public sector for the past 10 years. The new pension system is characterized by a drop in pension benefits when workers retire early, an increase in pension contribution payments to partially account for this drop in pension benefits and stronger incentives to continue working exemplified by penalties on pension income for retiring before the state pension commencement date and supplements for retiring 3 Employees were allowed to deduct their share of the contribution to sectoral early retirement plans from their gross wages.…”

How Sensitive are Individual Retirement Expectations to Raising the Retirement Age?

“…3 Stated preferences are increasingly used in economic studies that focus on labor supply (Kimball and Shapiro 2008) and retirement (Van Soest and Vonkova 2013). 4 Retirement benefits are traditionally thought to affect individual behavior through two channels: an income effect and a price effect (Euwals et al 2010). The income effect refers to changes in behavior due to changes in lifetime income.…”

“…Most studies on retirement decisions have focused on the role of benefit generosity in determining the retirement decision (e.g., Hurd and Boskin 1984;Burtless 1986;Stock and Wise 1990;Krueger and Pischke 1992;Samwick 1998;Gruber and Wise 1999;Schils 2005;Coile and Gruber 2007;Liebman et al 2009;Euwals et al 2010). These studies documented that the level, accrual, or option value of retirement benefits have a significant but modest effect on retirement dates.…”

Should I Stay or Should I Go? The Role of Actuarial Reduction Rates in Individual Retirement Planning in Germany

“…In order to distill the effect solely based on a policy change, like a change in the actuarial reduction rates for early retirement, one needs to account for the interactions between the different paths into retirement (see Bratberg et al 2004). There is a wideranging literature on generous early retirement programs and how these programs affect actual retirement age (see Euwals et al 2010, Gruber and Wise 2004, Bratberg et al 2004). …”