December 14, 2005

Early retirement behaviour in the Netherlands; evidence from a policy reform

Omzetting VUT naar prepensioen zorgt voor langer doorwerken

Press release
De omzetting van VUT naar prepensioen heeft geleid tot uitstel van vervroegde pensionering. In de periode 1997-2000 heeft de eerste fase van de omzetting er al voor gezorgd dat de onderzochte groep oudere werknemers gemiddeld vier maanden later met (vroeg)pensioen ging.

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In the early 1990s, the Dutch social partners agreed upon transforming the generous and actuarially unfair PAYG early retirement schemes into less generous and actuarially fair capital funded schemes.

The starting dates of the transitional arrangements varied by industry sector. In this study, we exploit the variation in starting dates to estimate the causal impact of the policy reform on early retirement behaviour.

We use a large administrative dataset, the Dutch Income Panel 1989-2000, to estimate hazard rate models for early retirement. We conclude that the policy reform induced workers to postpone early retirement. Model simulations show that the first phase of the transition has already led to an average retirement postponement by 4 months in the group of elderly workers investigated. It will become about 9 months once the transition is fully completed.