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Pension decrement rates across Europe – Are they too low?

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  • Freudenberg, Christoph
  • Laub, Natalie
  • Sutor, Tim

Abstract

In light of an ageing population, many European countries are aiming to increase the effective retirement age. Pension decrement rates play a key role in this as they determine the financial incentives for early retirement. In the following, a model is developed to calculate decrement rates which lead to financial neutrality of the decision on when to retire. The model is applied to 19 European countries. Results show that in most countries, official decrement rates tend to be lower than neutral rates. A sensitivity analysis and several alternative model variants underscore that, for the majority of countries, this result seems to be robust to the assumptions taken.

Suggested Citation

  • Freudenberg, Christoph & Laub, Natalie & Sutor, Tim, 2018. "Pension decrement rates across Europe – Are they too low?," The Journal of the Economics of Ageing, Elsevier, vol. 12(C), pages 35-45.
    • Handle: RePEc:eee:joecag:v:12:y:2018:i:c:p:35-45
    DOI: 10.1016/j.jeoa.2017.12.001
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    2. Michael Christl & Dénes Kucsera, 2019. "Actuarial Neutrality and Financial Incentives for Early Retirement in the Austrian Pension System," DANUBE: Law and Economics Review, European Association Comenius - EACO, issue 1, pages 1-22, March.
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    More about this item

    Keywords

    Early retirement; Pension reform; International comparison; (Pension) Decrement rates; Actuarial adjustment;
    All these keywords.

    JEL classification:

    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination

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