Longevity Risk and Taxation of Public Pensions

We study transitions from EET tax regime to TEE regime in a defined-benefit pension scheme with a numerical overlapping generations model, using stochastic mortality projections as inputs. In a traditional pension scheme with no automatic longevity rules, such as a link between life expectancy and pensions or retirement age, the tax regime shift can be used to improve public finances, when longevity increases. Diminished private saving and weaker labour supply incentives are among the downsides. Especially the latter makes the reform welfare-reducing, if the improvement in state finances is not used to relieve taxation of labour.

CESifo Working Paper No. 5640 (December 2015)

Publication info

Part of researches
Economic Consequences of Ageing [Completed]
Part of programs
Public finance and economic policy
Date
16.12.2015
Avainsanat
Verotus, eläkkeet, pitkäikäisyys
Keywords
Taxation, pensions, longevity
JEL
H550
Pages
30
Availability of print version
Available
Language
English
Publication on other services
www.cesifo-group.de