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An Assessment of Alternatives for the Dutch First Pension Pillar, The Design of Pension Schemes

Author

Listed:
  • Nick Draper
  • André Nibbelink

    (CPB Netherlands Bureau for Economic Policy Analysis)

  • Johannes Uhde

Abstract

The ageing of the Dutch population, resulting in an increase in the number of retirees relative to the working population, has induced a debate about the sustainability of the Dutch first pillar pension scheme (AOW). The system is financed as a pay-as-you-go system. This paper explores possible alternatives for the AOW. It does so by setting up a stochastic partial equilibrium model to study intragenerational insurance, which inlcudes longevity and productivity risk. The model shows the welfare, labour-market, saving and unintended-bequest effects of a shift from a Beveridge towards a Bismarck system in which pension rights depend on labour-market history. The main conclusion is that a shift of the first pillar pensions from a Beveridge towards a Bismarck system is not necessarily welfare improving from an ex-ante insurance perspective, i.e. before the veil of ignorance is lifted. Moreover, a means test of the first pillar against wealth income, which implies a lower AOW when an individual has wealth income and a lower pension premium for everyone, does not improve welfare in the setting of the model considered in this paper.

Suggested Citation

  • Nick Draper & André Nibbelink & Johannes Uhde, 2013. "An Assessment of Alternatives for the Dutch First Pension Pillar, The Design of Pension Schemes," CPB Discussion Paper 259, CPB Netherlands Bureau for Economic Policy Analysis.
    • Handle: RePEc:cpb:discus:259
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    1. Nick Draper & André Nibbelink & Johannes Uhde, 2015. "An Assessment of Alternatives for the Dutch First Pension Pillar System," De Economist, Springer, vol. 163(3), pages 281-302, September.

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    More about this item

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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