Working Paper: NBER ID: w27508
Authors: Devon Gorry; Kyung Min Lee; Sita Slavov
Abstract: We investigate the impact of more generous terms for delaying state pensions on claiming and labor supply in the United Kingdom using a 2005 policy change. First, we find that the more generous delay terms reduced the fraction of males receiving pensions at the earliest eligibility age and shortly after. While there are also post-policy changes in women’s claiming behavior, further investigation reveals that these changes do not coincide with the start of the policy and are therefore less likely to be causal effects. Second, we find post-policy increases in labor supply around the earliest pension eligibility age, followed by post-policy decreases in labor supply at older ages. While these labor supply changes cannot easily be separated from longer-term trends, they are consistent with some individuals choosing to work longer to finance pension delay, followed by some individuals retiring earlier due to the income effect from more generous pension benefits. Finally, we find that among individuals who delayed pensions for up to 5 years, about 3 percent of individuals took their gains from delay as lump sums, an option made available under the policy changes.
Keywords: pension; retirement; labor supply; claiming behavior
JEL Codes: H55; J26
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| more generous pension delay terms (J26) | reduced fraction of males receiving pensions at age 65 (J26) |
| more generous pension delay terms (J26) | increases in labor supply around earliest eligibility ages (J26) |
| increases in labor supply around earliest eligibility ages (J26) | decreases in labor supply at older ages (J26) |
| more generous pension delay terms (J26) | 3% opted to take gains from delay as lump sums (G35) |
| policy change (D78) | significant decrease in pension receipt at age 65 for men (J26) |
| policy change (D78) | long-term effect on male claiming behavior (D91) |