Private Pensions and Inflation

18 Pages Posted: 25 Jun 2004 Last revised: 23 Jul 2010

See all articles by Martin S. Feldstein

Martin S. Feldstein

National Bureau of Economic Research (NBER) (deceased); Harvard University (deceased)

Date Written: October 1980


Much of the recent discussion about the relation between pensions and inflation has emphasized the adverse impact that the un-expected rise in inflation has had on pension recipients and on the performance of pension funds. In contrast, the present paper focuses on the way that pensions are likely to evolve in response to the expectation of continued inflation in the future and to the uncertainty about the rate of inflation. The unfortunate effects that occurred when inflation caught pensioners and pension fund managers by surprise should not be confused with an inability to adjust to future conditions, even uncertain future conditions. As I shall explain, the persistence of a high rate of inflation is likely to increase the share of total saving that goes into private pensions. Since the tax treatment of pension contributions allows individuals to save in this way for retirement on the same terms that they would under a consumption tax,' the existence of the private pension system may be one of a few things that prevents the national saving rate from going even lower in the current inflationary environment.

Suggested Citation

Feldstein, Martin S., Private Pensions and Inflation (October 1980). NBER Working Paper No. w0568, Available at SSRN:

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