Why Forcing People to Save for Retirement May Backfire
45 Pages Posted: 26 Apr 2005
Date Written: April 2005
If individuals are unable or unwilling to borrow, a higher than desired second pillar pension capital may induce people to retire earlier than they would have in the absence of such a scheme. Individuals thus leave the workforce as soon as the retirement income is deemed sufficient and the pension plan avails withdrawal of benefits. We provide evidence using individual data from a selection of Swiss pension funds, allowing us to perfectly control for pension scheme details. Our findings suggest that affordability is a key determinant in the retirement decisions. The higher the accumulated pension capital, the earlier individuals tend to leave the workforce.
Keywords: occupational pension, retirement decision, duration models
JEL Classification: D91, H31, J26
Suggested Citation: Suggested Citation