Preparing for Policy Changes: Social Security Expectations and Pension Scheme Participation
AbstractWestern governments are currently contemplating how to adapt their Pay-As-You-Go pension systems so that these remain financially sustainable, even with an aged population. To the extent that policy-makers haven't already adapted their old age social security schemes, an ageing population thus leads to policy uncertainty in first pillar pensions. This paper sheds more light on the relationship between public and private savings by analyzing private pension scheme participation in the presence of such policy uncertainty. To do so, I assess the influence of subjective policy change expectations on voluntary pension scheme participation in the Netherlands. I find that participation in private pension schemes is higher for those who assign a high probability to the dismantlement of old age social security – in terms of lower benefits levels but more so in terms of a higher eligibility age. In addition, subjectively short-lived individuals who believe an eligibility age increase to be more likely than a benefit level cut, participate more. This could be explained by the fact that the relative cost of an eligibility age increase is larger for those who expect to live shorter. Individuals hence do prepare themselves for anticipated policy changes in old age social security and policy uncertainty in social security thus seems to lead to an increase in, or crowding in of, private savings.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 3623.
Length: 34 pages
Date of creation: Jul 2008
Date of revision:
Contact details of provider:
Postal: IZA, P.O. Box 7240, D-53072 Bonn, Germany
Phone: +49 228 3894 223
Fax: +49 228 3894 180
Web page: http://www.iza.org
Postal: IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany
Find related papers by JEL classification:
- D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
- D91 - Microeconomics - - Intertemporal Choice and Growth - - - Intertemporal Consumer Choice; Life Cycle Models and Saving
- H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
This paper has been announced in the following NEP Reports:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Guiso, Luigi & Jappelli, Tullio & Terlizzese, Daniele, 1992.
"Earnings Uncertainty and Precautionary Saving,"
CEPR Discussion Papers
699, C.E.P.R. Discussion Papers.
- Michael D. Hurd & Kathleen McGarry, 1997.
"The Predictive Validity of Subjective Probabilities of Survival,"
NBER Working Papers
6193, National Bureau of Economic Research, Inc.
- Michael D. Hurd & Kathleen McGarry, 2002. "The Predictive Validity of Subjective Probabilities of Survival," Economic Journal, Royal Economic Society, vol. 112(482), pages 966-985, October.
- Feldstein, Martin S, 1974. "Social Security, Induced Retirement, and Aggregate Capital Accumulation," Journal of Political Economy, University of Chicago Press, vol. 82(5), pages 905-26, Sept./Oct.
- Bowman, David & Minehart, Deborah & Rabin, Matthew, 1999.
"Loss aversion in a consumption-savings model,"
Journal of Economic Behavior & Organization,
Elsevier, vol. 38(2), pages 155-178, February.
- Euwals, Rob, 2000. "Do Mandatory Pensions Decrease Household Savings? Evidence for the Netherlands," IZA Discussion Papers 113, Institute for the Study of Labor (IZA).
- Orazio P. Attanasio & Susann Rohwedder, 2003. "Pension Wealth and Household Saving: Evidence from Pension Reforms in the United Kingdom," American Economic Review, American Economic Association, vol. 93(5), pages 1499-1521, December.
- Martin Browning & Annamaria Lusardi, 1995.
"Household Saving: Micro Theories and Micro Facts,"
Department of Economics Working Papers
1995-02, McMaster University.
- Jappelli, Tullio, 1995. "Does social security reduce the accumulation of private wealth? Evidence from Italian survey data," Ricerche Economiche, Elsevier, vol. 49(1), pages 1-31, March.
- Kotlikoff, Laurence J, 1979. "Testing the Theory of Social Security and Life Cycle Accumulation," American Economic Review, American Economic Association, vol. 69(3), pages 396-410, June.
- Jeff Dominitz & Charles F. Manski & Jordan Heinz, 2003. ""Will Social Security Be There For You?": How Americans Perceive Their Benefits," NBER Working Papers 9798, National Bureau of Economic Research, Inc.
- Melvin Stephens, Jr., 2003.
"Job Loss Expectations, Realizations, and Household Consumption Behavior,"
NBER Working Papers
9508, National Bureau of Economic Research, Inc.
- Melvin Stephens, 2004. "Job Loss Expectations, Realizations, and Household Consumption Behavior," The Review of Economics and Statistics, MIT Press, vol. 86(1), pages 253-269, February.
- Alessandra Guariglia & Sheri Markose, 2000. "Voluntary Contributions to Personal Pension Plans: Evidence from the British Household Panel Survey," Fiscal Studies, Institute for Fiscal Studies, vol. 21(4), pages 469-488, December.
- van Santen, Peter & Alessie, Rob & Kalwij, Adriaan, 2012. "Probabilistic survey questions and incorrect answers: Retirement income replacement rates," Journal of Economic Behavior & Organization, Elsevier, vol. 82(1), pages 267-280.
- Bissonnette, Luc & van Soest, Arthur, 2011.
"The Future of Retirement and the Pension System: How the Public's Expectations Vary over Time and across Socio-Economic Groups,"
IZA Discussion Papers
5759, Institute for the Study of Labor (IZA).
- Bissonnette, L. & Soest, A.H.O. van, 2011. "The Future of Retirement and the Pension System: How the Public’s Expectations Vary over Time and across Socio-Economic Groups," Discussion Paper 2011-065, Tilburg University, Center for Economic Research.
- Wiel, K.M. van der, 2009. "Essays on Expectations, Power and Social Security," Open Access publications from Tilburg University urn:nbn:nl:ui:12-3710369, Tilburg University.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mark Fallak).
If references are entirely missing, you can add them using this form.