This paper studies the redistribution and welfare effects of increasing the flexibility of individual pension take-up. We use an overlapping-generations model with Beveridgean pay-as-you-go pensions, where individuals differ in ability and life span. We find that introducing flexible pension take-up can induce a Pareto improvement when the initial pension scheme contains within-cohort redistribution and induces early retirement. Such a Pareto-improving reform entails the application of uniform actuarial adjustment of pension entitlements based on average life expectancy. Introducing actuarial non-neutrality that stimulates later retirement further improves such a flexibility reform.

flexible pensions, redistribution, retirement
Externalities; Redistributive Effects; Environmental Taxes and Subsidies (jel H23), Social Security and Public Pensions (jel H55), Retirement; Retirement Policies (jel J26)
Tinbergen Institute
hdl.handle.net/1765/40959
Tinbergen Institute Discussion Paper Series
Discussion paper / Tinbergen Institute
Erasmus School of Economics

Adema, Y, Bonenkamp, J, & Meijdam, L. (2013). Flexible Pension Take-up in Social Security (No. TI 13-091/VI). Discussion paper / Tinbergen Institute (pp. 1–41). Tinbergen Institute. Retrieved from http://hdl.handle.net/1765/40959