Rethinking Pension Reform

Rethinking Pension Reform Rethinking Pension Reform WITH SUPPORT OF CEPR PARIS FOUNDING PARTNERS CEPR PRESS Centre for Economic Policy Research187 boulevard Saint-Germain75007, Paris, France 33 Great Sutton StreetLondon, EC1V 0DX, UK Tel: +44 (0)20 7183 8801Email: cepr@cepr.orgWeb: www.cepr.org ISBN: 978-1-912179-89-3 Copyright © CEPR Press Rethinking Pension Reform Edited by Giulia Giupponi andArthurSeibold CENTRE FOR ECONOMIC POLICY RESEARCH (CEPR) The Centre for Economic Policy Research (CEPR) is a network of almost 1,900 researcheconomists based mostly in European universities. The Centre’s goal is twofold: topromote world-class research, and to get the policy-relevant results into the hands of keydecision-makers. CEPR’s guiding principle is ‘Research excellence with policy relevance’.It was founded in the UK in 1983, where it is a Charity, and in November 2019 CEPRinitiated the creation of an Association under French law, in order to provide a vehicle foran expansion in France. The members of the Conseil d’Administration of the Associationare identical to the UK Board of Trustees. CEPR is independent of all public and private interest groups. It takes no institutionalstand on economic policy matters and its core funding comes from its InstitutionalMembers, projects that it runs and sales of publications. Because it draws on such a largenetwork of researchers, its output reflects a broad spectrum of individual viewpoints aswell as perspectives drawn from civil society. CEPR research may include views on policy,but the Trustees/members of the Conseil d’Administration of the Association do not giveprior review to its publications. The opinions expressed in this report are those of theauthors and not those of CEPR. Sir Charlie BeanRichard PortesBeatrice Weder di MauroMaristella BotticiniAntonio FatásUgo PanizzaHélène ReyTessa Ogden Chair of the BoardFounder and Honorary PresidentPresidentVice Presidents Chief Executive Officer Contents Forewordvii 1 Introduction1Giulia Giupponi and Arthur Seibold 2 Recent pension reforms in Europe9Giulia Giupponi and Arthur Seibold 3 How to effectively encourage later retirement? Statutory retirement agesversus financial incentives25Arthur Seibold 4 The impact of pension benefit levels on labour supply and retirement35Giulia Giupponi 5 From pension reforms to welfare: Aunifying framework45Camille Landais and Johannes Spinnewijn 6 Inequality in life expectancy and the design of pension systems57Antoine Bozio, Simon Rabaté and Maxime Tô 7 Interactions of pension reforms with other social insurance schemes67Andreas Haller and Stefan Staubli 8 Making Social Security sustainable: Abalanced proposal for reform77Bess Olshen and Mark Duggan 9 From evidence to pension policy: What have we learned?91Camille Landais and Johannes Spinnewijn Foreword Demographic change caused by ageing populations is occurring rapidly across thedeveloped world. Surges in life expectancy coupled with declining fertility rates have ledto unprecedented fiscal pressure on social security systems. In an attempt to alleviatethis pressure, governments around the world have implemented various reforms of publicpension systems over the last 30 years and continue to work towards pension reforms thatare more effective and equitable. At the same time, there has been a large increase in academic research on retirementbehaviour and the impact of pension reforms, and this eBook brings together a diversearray of contributions focused on rethinking and reforming public pension systemsaround the world, in the light of changing demography. The eBook pursues two mainobjectives. First, it reviews insights from the newest advances in this area of academicresearch; and second, it delves into practical policy lessons that can inform the debatesaround pension reform in many countries. The chapters offer a wealth of new insightsand discuss pension reform in Europe and the United States, along with topics coveringincentives to induce individuals to work longer, the efficacy of different types of reforms,and alternative methods to delay retirement. Other chapters explore the consequences of these reforms and the potential trade-offsat stake when designing and implementing these policies. Furthermore, the eBookdiscusses trends and inequalities in life expectancy and the implications those have for thedistributive properties of pension systems, as well as the interaction between retirementand other social insurance schemes. Overall, this eBook offers a comprehensive understanding of pension reforms, balancingfiscal sustainability with insurance and redistribution effects. With unease about fiscalsustainability to the fore in many advanced economies, and countries around the worldattempting to balance an ageing population with budgetary concerns, the eBook, drawingas it does on the expertise of these leading academic authors, aims to provide freshperspectives on how to (re)think pension reforms and is