Mandatory pension contributions, household consumption, and savings

50 Pages Posted: 30 Mar 2023 Last revised: 28 Feb 2024

See all articles by Linda Sandris Larsen

Linda Sandris Larsen

Copenhagen Business School

Ulf Nielsson

Copenhagen Business School

Mara Nutu

Goethe University Frankfurt

Jesper Rangvid

Copenhagen Business School

Multiple version iconThere are 2 versions of this paper

Date Written: February 27, 2024

Abstract

Using rich register data from Denmark, we study whether people save enough to maintain their pre-retirement level of consumption during retirement. We find that 79% of retirees do. This high fraction associates with mandatory labour market contributions. The 21% of individuals who do not save enough to maintain their pre-retirement level of consumption are less likely to have mandatory pension schemes and do not compensate for the lack thereof via voluntary private savings. However, mandatory contributions come at the cost of lower consumption and non-retirement savings during working years. This follows from results showing that people who have seen their mandatory pension contributions increase the most over time have cut consumption and non-retirement wealth accumulation during working years, compared to individuals having experienced only a small increase in mandatory pension contributions.

Keywords: pension savings, household finance, consumption

JEL Classification: D14, G11, G20, G51

Suggested Citation

Larsen, Linda Sandris and Nielsson, Ulf and Nutu, Mara and Rangvid, Jesper, Mandatory pension contributions, household consumption, and savings (February 27, 2024). Available at SSRN: https://ssrn.com/abstract=4389931 or http://dx.doi.org/10.2139/ssrn.4389931

Linda Sandris Larsen (Contact Author)

Copenhagen Business School ( email )

Solbjerg Plads 3, A5
Frederiksberg, 2000
Denmark

Ulf Nielsson

Copenhagen Business School ( email )

Solbjerg Plads 3
Frederiksberg C, DK - 2000
Denmark

Mara Nutu

Goethe University Frankfurt ( email )

Jesper Rangvid

Copenhagen Business School ( email )

Solbjerg Plads 3
Frederiksberg C, DK - 2000
DENMARK

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