To defer or not defer? UK state pension and work decisions in a lifecycle model

Ricky Kanabar and Peter Simmons

Applied Economics, 2016, vol. 48, issue 58, 5699-5716

Abstract: The UK state pension (which depends only on age) includes an option to defer take up which yields either a subsequent lump sum or higher weekly pension. We analyse the joint decisions on pension deferral and intertemporal labour supply/participation in a lifecycle setting. We show that deferral is purely a financial decision, but the impact of deferral on work decisions depends on preferences, wage rates, non-labour income and initial wealth. To exactly characterize this, we use a quasilinear utility function and provide calibrated simulations. We also discuss the choice between a lump sum or increased weekly pension.

Date: 2016
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DOI: 10.1080/00036846.2016.1184374

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