Reforming retirement age in DB and DC pension systems in an aging OLG economy with heterogenous agents

Abstract

We analyze the effects of increasing the retirement age in two economies with overlapping generations and within cohort ex ante heterogeneity. The first economy has a defined benefit system, and the second economy is in transition from a defined benefit to a defined contribution. We find that if increase in the retirement age is phased in a way that allows agents to adjust, welfare is not reduced and welfare effects have a similar magnitude and between-cohort distribution in both types of the pension systems.

The Effects Of Uncertainties In The Pension System On Economic Welfare

“…It is not unique to use an overlapping generation model to answer pension-related questions. The structure of the model enables us to separate groups of agents by their age, to endow one group with pension and investigate the effects of various changes in the exogenous variables or some changes in the behavior of the agents, the pension system, or the demographic elements (see for example in Tyrowicz et al (2016) with changes in the retirement age, Bielecky at al. (2015) with different pension systems, Buyse et al (2017) with heterogenous agents, Cipriani (2014) or Thøgersen (2015) with ageing).…”

Challenges of Regional Development in the Context of Population Ageing. Analysis Based on the Example of Opolskie Voivodeship

“…Many analyses show that lowering the retirement age in Poland (60 years for women and 65 for men since 2017) [30] significantly affected the situation of the labour market and forecasted a decline in professional activity in the future [18]. Furthermore, a lower retirement age will considerably decrease future pensions, and it will increase the number of paid minimum pensions and costs related to them [31]. Longer lifespan expands the demand on means necessary to meet the needs in the period of old age, and a lower retirement age increases these needs even more.…”