This paper studies the redistribution and welfare effects of increasing the flexibility of individual pension take-up. We use an overlapping-generations model with Beveridgean pay-as-you-go pensions, where individuals differ in ability and life span. We find that introducing flexible pension take-up can induce a Pareto improvement when the initial pension scheme contains within-cohort redistribution and induces early retirement. Such a Pareto-improving reform entails the application of uniform actuarial adjustment of pension entitlements based on average life expectancy. Introducing actuarial non-neutrality that stimulates later retirement further improves such a flexibility reform.
# 13-091/VI (2013-07-16)
- Yvonne Adema, Erasmus University Rotterdam, Netspar; Jan Bonenkamp, CPB Netherlands Bureau for Economic Policy Analysis, The Hague, Netspar, The Netherlands; Lex Meijdam, CentER, Tilburg University, Netspar, The Netherlands
- redistribution, retirement, flexible pensions
- JEL codes:
- H55, H23, J26