Participation in supplementary pension savings in Iceland

Asgeir Danielsson, Rannveig Sigurdardottir and Svava J. Haraldsdottir

Economics from Department of Economics, Central bank of Iceland

Abstract: We analyse participation in supplementary pension savings in Iceland using microdata on every person, aged 16 and over, registered in Iceland in 1999-2017. Although sizeable subsidies are offered, a large share of those eligible do not participate. The significant increase in subsidies in 2014 did affect participation, although less than expected. We find that women participate significantly more than men, apart from the youngest and oldest age groups. The difference between women and men is larger for single persons than for couples. It is also larger for those with only primary education than for those with tertiary education. The subsidies are such that the rate of return on the savings increases with age. Despite this, we find that participation rates are nearly constant between age 30 and age 60, whereupon participation starts to decline at around the time the savings can be withdrawn. We observe a significant correlation between the decision to start withdrawing funds and the decision to stop participating. Estimating equations for wage income using cross-sectional data, we find the usual concave (Mincer) shape, except for people in their late sixties, whose average wage income starts to increase, reflecting the tendency among higher-income people to retire later. We discuss the problems caused by the correlation between income and education, and between income and gender, and we use two-stage probit least squares to test for exogeneity of income.

JEL-codes: D12 D14 H2 H3 (search for similar items in EconPapers)
Date: 2023-08
New Economics Papers: this item is included in nep-age, nep-eur and nep-pbe
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