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Why Forcing People to Save for Retirement may Backfire

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  • Monika Bütler
  • Olivia Huguenin
  • Federica Teppa

Abstract

If individuals are unable or unwilling to borrow, a higher than desired second pillar pension capital may induce people to retire earlier than they would have in the absence of such a scheme. Individuals thus leave the workforce as soon as the retirement income is deemed sufficient and the pension plan avails withdrawal of benefits. We provide evidence using individual data from a selection of Swiss pension funds, allowing us to perfectly control for pension scheme details. Our findings suggest that affordability is a key determinant in the retirement decisions. The higher the accumulated pension capital, the earlier individuals tend to leave the workforce.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2005/wp-cesifo-2005-04/cesifo1_wp1458.pdf
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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1458.

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Date of creation: 2005
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Handle: RePEc:ces:ceswps:_1458

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Keywords: occupational pension; retirement decision; duration models;

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References

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Citations

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Cited by:
  1. Gonzales-Eiras, Martín & Niepelt, Dirk, 2004. "Sustaining Social Security," Seminar Papers 731, Stockholm University, Institute for International Economic Studies.
  2. J. Ignacio Conde-Ruiz & Vincenzo Galasso & Paola Profeta, 2006. "Early Retirement and Social Security: A Long Term Perspective," CSEF Working Papers 165, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
  3. Heidler, Matthias & Raffelhüschen, Bernd & Leifels, Arne, 2006. "Heterogenous life expectancy, adverse selection, and retirement behaviour," FZG Discussion Papers 13, Research Center for Generational Contracts (FZG), University of Freiburg.
  4. Vincenzo Galasso, 2012. "The Political Feasibility of Postponing Retirement," CESifo DICE Report, Ifo Institute for Economic Research at the University of Munich, vol. 10(4), pages 27-31, December.
  5. George Kudrna & Alan Woodland, 2012. "Macroeconomic and Welfare Effects of the 2010 Changes to Mandatory Superannuation," Working Papers 201210, ARC Centre of Excellence in Population Ageing Research (CEPAR), Australian School of Business, University of New South Wales.

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