Addressing Longevity’ Heterogeneity in Pension Scheme Design

Mercedes Ayuso, Jorge Miguel Bravo, Robert Holzmann

Research output: Contribution to journalArticle

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Abstract

This paper demonstrates that the link between heterogeneity in longevity and lifetime income across countries is mostly high and often increasing; that it translates into an implicit tax/subsidy, with rates reaching 20 percent and higher in some countries; that such rates risk perverting redistributive objectives of pension schemes and distorting individual lifecycle labor supply and savings decisions; and that this in turn risks invalidating current reform approaches of a closer contribution-benefit link and life expectancy-indexed retirement age. The paper suggests and explores a number of interventions in the accumulation, benefit determination, and disbursement stages to address longevity’ heterogeneity.
Original languageEnglish
Pages (from-to)1-21
JournalJournal of Finance and Economics
Volume6
Issue number1
DOIs
Publication statusPublished - 2017

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Pension scheme
Retirement age
Implicit taxes
Labor supply
Income
Life cycle
Tax subsidies
Life expectancy
Savings

Keywords

  • Defined Contribution Scheme
  • Two-Tier Contribution Structure
  • Proxied Life Expectancy
  • Tax/Subsidy Structure

Cite this

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abstract = "This paper demonstrates that the link between heterogeneity in longevity and lifetime income across countries is mostly high and often increasing; that it translates into an implicit tax/subsidy, with rates reaching 20 percent and higher in some countries; that such rates risk perverting redistributive objectives of pension schemes and distorting individual lifecycle labor supply and savings decisions; and that this in turn risks invalidating current reform approaches of a closer contribution-benefit link and life expectancy-indexed retirement age. The paper suggests and explores a number of interventions in the accumulation, benefit determination, and disbursement stages to address longevity’ heterogeneity.",
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Addressing Longevity’ Heterogeneity in Pension Scheme Design. / Ayuso, Mercedes; Bravo, Jorge Miguel; Holzmann, Robert.

In: Journal of Finance and Economics, Vol. 6, No. 1, 2017, p. 1-21.

Research output: Contribution to journalArticle

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