Pension Taxes versus Early Retirement Rights
AbstractThis paper deals with two policy approaches to address the problem of the “pensions time bomb” by influencing private-sector pension provision. In assessing the role of private-sector pensions, it is common to concentrate exclusively on the issue of whether early retirement penalties or late retirement benefits are actuarially fair. We argue that this focus is unbalanced since private-sector pension arrangements have significant implications for governments' finances. When private pensions encourage early retirement, they reduce the number of people paying taxes and increase the number of people supplementing their private pensions through various forms of public support. To induce private-sector pension providers to internalize this externality, we examine two policy responses: taxing private pension receipts of early retirees, and issuing “early retirement rights.” The government’s receipts from the pension taxes or the sale of early retirement rights are used, in part, to provide employment vouchers for people of pensionable age.
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Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 536.
Length: 12 pages
Date of creation: Jul 2002
Date of revision:
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Find related papers by JEL classification:
- H1 - Public Economics - - Structure and Scope of Government
- H2 - Public Economics - - Taxation, Subsidies, and Revenue
- H6 - Public Economics - - National Budget, Deficit, and Debt
This paper has been announced in the following NEP Reports:
- NEP-ALL-2002-08-08 (All new papers)
- NEP-LAB-2002-08-08 (Labour Economics)
- NEP-PBE-2002-08-08 (Public Economics)
- NEP-PUB-2002-08-19 (Public Finance)
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