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Essays on the Economics of Retirement and Pensions

Tetlow, GC; (2015) Essays on the Economics of Retirement and Pensions. Doctoral thesis , UCL (University College London). Green open access

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Abstract

The papers in this thesis use household survey data to examine financial decisions made at the end of working life and in early retirement. Chapters 2 and 3 focus on the timing of retirement. Chapters 4 and 5 examine the importance of longevity expectations for financial decision-making. Chapter 2 examines the impact of an increase in the early retirement age for women in the UK. Women’s employment rates at age 60 increased by 7.3 percentage points when the early retirement age increased to 61 and employment rates of male partners increased by 4.2 percentage points. The results suggest these effects are more likely explained by the policy change having a signalling effect rather than being due to credit constraints or changes in financial incentives. Chapter 3 examines how responsive retirement decisions are to dynamic financial incentives. On average both men and women respond significantly to these financial incentives. However, responses to these financial incentives alone are not sufficient to explain the ‘spikes’ in retirement that are observed in practice. Chapter 4 shows that, overall, individuals understand how their chances of survival compare to other people of their age and sex (e.g. those who engage in poor health behaviours expect lower chances of surviving than healthier people) and individuals’ expectations are predictive of their subsequent mortality. However, I also show that individuals perceive a ‘flatter’ survival curve than standard life tables would suggest. Two simple models of life cycle behaviour demonstrate that this misperception of longevity could explain some apparently ‘puzzling’ behaviour seen in practice. Chapter 5 examines the importance of private information about longevity in the market for annuities. This chapter shows that there is adverse selection. However, it remains an open question what the welfare loss is, particularly since individuals misperceive their chances of survival on average.

Type: Thesis (Doctoral)
Title: Essays on the Economics of Retirement and Pensions
Event: University College London
Open access status: An open access version is available from UCL Discovery
Language: English
Keywords: retirement, pensions, financial incentives, survival expectations, early retirement age, life cycle model
UCL classification: UCL > Provost and Vice Provost Offices
UCL > Provost and Vice Provost Offices > UCL SLASH
UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of SandHS > Dept of Economics
URI: https://discovery.ucl.ac.uk/id/eprint/1473149
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