Pension Taxes versus Early Retirement Rights

Mike Orszag () and Dennis Snower
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Mike Orszag: Towers Watson

No 536, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This paper deals with two policy approaches to address the problem of the “pensions time bomb” by influencing private-sector pension provision. In assessing the role of private-sector pensions, it is common to concentrate exclusively on the issue of whether early retirement penalties or late retirement benefits are actuarially fair. We argue that this focus is unbalanced since private-sector pension arrangements have significant implications for governments' finances. When private pensions encourage early retirement, they reduce the number of people paying taxes and increase the number of people supplementing their private pensions through various forms of public support. To induce private-sector pension providers to internalize this externality, we examine two policy responses: taxing private pension receipts of early retirees, and issuing “early retirement rights.” The government’s receipts from the pension taxes or the sale of early retirement rights are used, in part, to provide employment vouchers for people of pensionable age.

Keywords: pensions; employment; taxes; early retirement (search for similar items in EconPapers)
JEL-codes: H1 H2 H6 (search for similar items in EconPapers)
Pages: 12 pages
Date: 2002-07
New Economics Papers: this item is included in nep-lab, nep-pbe and nep-pub
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Citations: View citations in EconPapers (1)

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