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To defer or not defer? State Pension in a Lifecycle Model

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  • Ricky Kanabar
  • Peter Simmons

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 life cycle 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 characterise this we use a quasilinear utility function, and provide calibrated simulations. We also discuss the choice between a lump sum or increased weekly pension

Suggested Citation

  • Ricky Kanabar & Peter Simmons, 2013. "To defer or not defer? State Pension in a Lifecycle Model," Discussion Papers 13/26, Department of Economics, University of York.
    • Handle: RePEc:yor:yorken:13/26
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    References listed on IDEAS

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    1. Orazio Attanasio & Hamish Low & Virginia Sánchez-Marcos, 2008. "Explaining Changes in Female Labor Supply in a Life-Cycle Model," American Economic Review, American Economic Association, vol. 98(4), pages 1517-1552, September.
    2. Richard Disney & Sarah Smith, 2002. "The Labour Supply Effect of the Abolition of the Earnings Rule for Older Workers in the United Kingdom," Economic Journal, Royal Economic Society, vol. 112(478), pages 136-152, March.
    3. Alan L. Gustman & Thomas L. Steinmeier, 2002. "Retirement and the Stock Market Bubble," NBER Working Papers 9404, National Bureau of Economic Research, Inc.
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    More about this item

    Keywords

    Retirement; Labour Supply; Ageing; UK State Pension;
    All these keywords.

    JEL classification:

    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination
    • J18 - Labor and Demographic Economics - - Demographic Economics - - - Public Policy
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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