January 22, 2009

Pension plans and the retirement replacement rates in the Netherlands

This study compares the expected retirement replacement rates of several cohorts of Dutch employees at the time of their planned retirement with the 'actual' replacement rates based on available pension records.

We find that using reasonable indexation rates, the expected replacement rates are higher than the one we compute. Larger discrepancies are found for younger cohorts. We decompose the difference between the expected and 'actual' replacement rates and find that the mismatch is related to poor institutional knowledge for the whole sample. We also show the role of assumptions on institutions and on wage profiles in determining our results.