The Design of Pension Schemes

52 Pages Posted: 16 Dec 2013

See all articles by Nick Draper

Nick Draper

CPB Netherlands Bureau of Economic Policy Analysis

André Nibbelink

CPB Netherlands Bureau of Economic Policy Analysis

Johannes Uhde

University of Würzburg

Date Written: December 2, 2013

Abstract

This paper explores possible alternatives for the current Dutch first pillar pension scheme (AOW). It presents the welfare, labour market, saving and unintended bequest effects of a shift from a Beveridge towards a Bismarck system in which the pension rights depend on the labour market history. The paper focuses on the insurance with the AOW against both longevity and productivity risk. 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.

Suggested Citation

Draper, Nick and Nibbelink, André and Uhde, Johannes, The Design of Pension Schemes (December 2, 2013). Netspar Discussion Paper No. 12/2013-069, Available at SSRN: https://ssrn.com/abstract=2368160 or http://dx.doi.org/10.2139/ssrn.2368160

Nick Draper (Contact Author)

CPB Netherlands Bureau of Economic Policy Analysis ( email )

P.O. Box 80510
2508 GM The Hague, 2585 JR
Netherlands

André Nibbelink

CPB Netherlands Bureau of Economic Policy Analysis ( email )

P.O. Box 80510
2508 GM The Hague, 2585 JR
Netherlands

Johannes Uhde

University of Würzburg ( email )

Sanderring 2
Würzburg, D-97070
Germany

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