Public Pensions and Private Savings

64 Pages Posted: 22 Mar 2021 Last revised: 2 Sep 2021

Date Written: March 4, 2021


How does the provision of public pension benefits impact private savings? We answer this question in the context of a reform in Denmark that altered old-age benefit payouts through a discontinuous increase in pension eligibility ages contingent on birthdate. Using detailed administrative data and a regression discontinuity design, we identify the causal effects of the policy, leveraging our setting to study essentially the entire financial portfolio. We document responses over two distinct time horizons. First, we show a lack of responses after the reform was announced but before it was implemented, inconsistent with the notion that future differences in pension eligibility impact savings. Second, we show large savings responses after implementation, when delayed benefit eligibility induces individuals to extend employment. Specifically, we find increased contributions to both employer-sponsored and personal retirement accounts, whereas we find no evidence of adjustments to other savings vehicles, such as bank or stock market accounts. Additional analyses point to inertia as a leading explanatory channel. The increased savings in personal retirement plans is entirely driven by those who made consistent contributions in the past. Moreover, the increased savings in employer-sponsored plans is largely explained by continuing to contribute at employer default rates, highlighting a role for firm policies in mediating responses to social security reform.

Keywords: social security, private savings, pension reform

JEL Classification: H55, D14, J26

Suggested Citation

García-Miralles, Esteban and Leganza, Jonathan M., Public Pensions and Private Savings (March 4, 2021). Available at SSRN: or

Esteban García-Miralles (Contact Author)

Banco de España ( email )

Alcala 50
Madrid 28014

Jonathan M. Leganza

Clemson University ( email )

101 Sikes Ave
Clemson, SC 29634
United States

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