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To defer or not defer? UK state pension and work decisions in a lifecycle model

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  • Ricky Kanabar
  • Peter Simmons

Abstract

The UK state pension (which depends only on age) includes an option to defer take up which yields either a subsequent lump sum or higher weekly pension. We analyse the joint decisions on pension deferral and intertemporal labour supply/participation in a lifecycle setting. We show that deferral is purely a financial decision, but the impact of deferral on work decisions depends on preferences, wage rates, non-labour income and initial wealth. To exactly characterize this, we use a quasilinear utility function and provide calibrated simulations. We also discuss the choice between a lump sum or increased weekly pension.

Suggested Citation

  • Ricky Kanabar & Peter Simmons, 2016. "To defer or not defer? UK state pension and work decisions in a lifecycle model," Applied Economics, Taylor & Francis Journals, vol. 48(58), pages 5699-5716, December.
    • Handle: RePEc:taf:applec:v:48:y:2016:i:58:p:5699-5716
    DOI: 10.1080/00036846.2016.1184374
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    Cited by:

    1. Gorry, Devon & Lee, Kyung Min & Slavov, Sita Nataraj, 2023. "Does the actuarial adjustment for pension delay affect retirement and claiming decisions?," Journal of Pension Economics and Finance, Cambridge University Press, vol. 22(4), pages 590-603, October.

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