Implications of Full and Partial Retirement for Replacement Rates in a Defined Benefit System

Time: 2011, Tuesday April 12, 13.00-14.00 hours
Location: CPB-office, Van Stolkweg 14, The Hague

Presentation: Tunga Kantarci (University of Twente)

Discussant: Mauro Mastrogiacomo (CPB)

Language: English

Registration:  Please register by sending an email to seminars@cpb.nl.

Abstract subject: We use the actual parameters of an occupational pension fund, the state pension fund and the tax system in the Netherlands to compute net replacement rates for various types of full and partial retirement scenarios. We show the evolution of the replacement rates in these scenarios at the given parameters of the pension system and a hypothetical employee. We then vary these parameters to study the sensitivity of replacement rates to alternative conditions. We demonstrate the choice set of an employee for full and partial retirement plans at various ages, but pay particular attention to the plans relevant to the current policy measures which intend to enable people to work longer. Besides, we analyze the implications of early and late (partial) retirement for the occupational and state pension annuities. Analysis of the state pension shows that the individual or government derives no substantial financial gain or loss when the state pension is deferred beyond age 65. Replacement rate analysis shows that the income path of a partial retiree is much smoother than a full retiree; replacement rates substantially differ across the high and low income earners in early and late retirement plans; and a longer service length results in a more than proportional increase in the replacement rates.

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