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Pension plans and retirement incentives

  • Disney, Richard
  • Whitehouse, Edward

This paper aims to examine the impact of type of pension scheme on retirement behavior. Section 1 describes a simple, theoretical model of optimal retirement. Section 2 introduces an empirical model of a simple retirement savings plan, or defined contribution pension scheme. Section 3 compares this with a defined benefit scheme. Sections4 and 5 examine the effect of these pension plans on work incentives. The following three sections extend the basic model to introduce'real world'features of pension plans. Section 9 examines the policy implications of the results and sets out anagenda for future research in this area. The results show a powerful incentive to leave work at the earliest possible age in defined benefit plans. Defined contribution plans, in contrast, encourage people to remain in work longer.

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Paper provided by The World Bank in its series Social Protection Discussion Papers with number 20851.

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Date of creation: 31 Aug 1999
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Handle: RePEc:wbk:hdnspu:20851
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  5. Gora, Marek & Rutkowski, Michal, 1998. "The quest for pension reform : Poland's security through diversity," Social Protection Discussion Papers 20111, The World Bank.
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  15. Burtless, Gary, 1986. "Social Security, Unanticipated Benefit Increases, and the Timing of Retirement," Review of Economic Studies, Wiley Blackwell, vol. 53(5), pages 781-805, October.
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  19. Louis S. Jacobson & Robert J. LaLonde & Daniel Sullivan, 1992. "Earnings Losses of Displaced Workers," Upjohn Working Papers and Journal Articles 92-11, W.E. Upjohn Institute for Employment Research.
  20. Christopher J. Ruhm, 1995. "Secular Changes in the Work and Retirement Patterns of Older Men," Journal of Human Resources, University of Wisconsin Press, vol. 30(2), pages 362-385.
  21. Richard W. Johnson & David Neumark, 1997. "Age Discrimination, Job Separations, and Employment Status of Older Workers: Evidence from Self-Reports," Journal of Human Resources, University of Wisconsin Press, vol. 32(4), pages 779-811.
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  24. Robin L. Lumsdaine & James H. Stock & David A. Wise, 1994. "Pension Plan Provisions and Retirement: Men and Women, Medicare, and Models," NBER Chapters, in: Studies in the Economics of Aging, pages 183-222 National Bureau of Economic Research, Inc.
  25. Alan L. Gustman & Thomas L. Steinmeier, 1984. "Partial retirement and the analysis of retirement behavior," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 37(3), pages 403-415, April.
  26. Gerhard Naegele, 1996. "New Trends in Gradual Retirement in Germany*," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan, vol. 21(4), pages 524-533, October.
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  28. Robert Hutchens, 1988. "Do job opportunities decline with age?," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 42(1), pages 89-99, October.
  29. Zvi Bodie & John B. Shoven & David A. Wise, 1988. "Pensions in the U.S. Economy," NBER Books, National Bureau of Economic Research, Inc, number bodi88-1, December.
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  31. Dilnot, Andrew & Disney, Richard & Johnson, Paul & Whitehouse, Edward, 1994. "Pensions policy in the UK: An economic analysis," MPRA Paper 10478, University Library of Munich, Germany.
  32. Brugiavini, Agar, 1993. "Uncertainty resolution and the timing of annuity purchases," Journal of Public Economics, Elsevier, vol. 50(1), pages 31-62, January.
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  37. Edward Whitehouse, 1990. "The abolition of the pensions 'earnings rule'," Fiscal Studies, Institute for Fiscal Studies, vol. 11(3), pages 55-70, August.
  38. Richard Disney, 1996. "Can We Afford to Grow Older?," MIT Press Books, The MIT Press, edition 1, volume 1, number 026204157x, June.
  39. Richard Disney & Costas Meghir & Edward Whitehouse, 1994. "Retirement behaviour in Britain," Fiscal Studies, Institute for Fiscal Studies, vol. 15(1), pages 24-43, February.
  40. Palacios, Robert & Rocha, Roberto, 1998. "The Hungarian pension system in transition," Social Protection Discussion Papers 20048, The World Bank.
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