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Addressing Longevity Inequality: How Retirement Age Differentiation Can Be Implemented

Author

Listed:
  • Svend E Hougaard Jensen
  • Thorsteinn Sigurdur Sveinsson
  • Gylfi Zoega

Abstract

Differences in life expectancy across socioeconomic groups create a serious problem of inequality within the public part of the pension system. This article considers two actuarially sound ways of addressing longevity inequality. The first is to allow low life-expectancy workers to retire earlier and delay the retirement of the high life-expectancy workers so that the two groups receive the same amount, equal to the expected discounted value of future pension benefits received by the average worker under the current system. The second, and more radical, is to delegate to occupational pension funds the task of paying out the public pension benefits to each retiree, based on a lump-sum transfer from the government to the pension funds of an amount for each retiree equivalent to the payout in the first scenario. (JEL codes: E21 and E24)

Suggested Citation

  • Svend E Hougaard Jensen & Thorsteinn Sigurdur Sveinsson & Gylfi Zoega, 2024. "Addressing Longevity Inequality: How Retirement Age Differentiation Can Be Implemented," CESifo Economic Studies, CESifo Group, vol. 70(1), pages 1-16.
    • Handle: RePEc:oup:cesifo:v:70:y:2024:i:1:p:1-16.
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    File URL: http://hdl.handle.net/10.1093/cesifo/ifad012
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    References listed on IDEAS

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    1. Marko Koethenbuerger & Panu Poutvaara & Paola Profeta, 2008. "Why are more redistributive social security systems smaller? A median voter approach," Oxford Economic Papers, Oxford University Press, vol. 60(2), pages 275-292, April.
    2. Poutvaara, Panu, 2007. "Social security incentives, human capital investment and mobility of labor," Journal of Public Economics, Elsevier, vol. 91(7-8), pages 1299-1325, August.
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    More about this item

    Keywords

    longevity; retirement; inequality;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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