NB19-13: How Do Individuals’ Retirement Expectations...Respond to Major Pension Reforms?

Reforms to Social Security or private pensions are typically expected to affect behavior in certain ways, such as to encourage delayed retirement or additional retirement saving. However, the expected adjustments might fail to occur, for example if reforms are poorly understood or people are inattentive in making retirement-related decisions. If so, people may be less financially secure in old age. Assessing the impacts of reforms on the future age of retirement or adequacy of retirement income for current young or middle-aged workers is difficult, not least because the eventual outcomes may not be observed for decades to come. By focusing instead on retirement planning, we can gain insights into the eventual effects of these reforms long before the affected workers reach retirement age. In this project, we look at the impact of three major UK pension reforms on self-reported retirement expectations, saving, and preparedness for retirement.
To the extent that reforms lead to shifts in these planning behaviors in ways that policy makers may have expected – for example, that an increase in the pension eligibility age leads to increased saving and a later expected age of retirement – the impact on retirement security may be mitigated. The policy reforms that we consider include significant changes to pension claiming ages, to private pension coverage, and to the generosity of occupational pensions provided to public sector employees. This project will involve:
• Describing the implemented reforms and how they affect different individuals;
• Using large scale microdata to document recent trends in outcomes of interest;
• Comparing trends among groups directly affected and not affected by the reforms.