ABSTRACT
This chapter looks at the extent to which the trends might be explained by the financial incentives in the pension system that people faced when making their retirement decisions. It considers whether policy reforms could change this trend. The chapter deals with a comprehensive evaluation of the economic incentives for retirement underlying the United Kingdom (UK) pension system. It describes the UK pension system and the key elements that are likely to affect retirement behaviour. The chapter discusses the results from estimating profit models of retirement including these incentive measures and discusses their implications for retirement behaviour by means of alternative scenarios for reforms to the pension system. It presents simulation results from two policy reforms designed to reduce the incentives for early retirement in the pension system. To model retirement transitions Blundell et al. estimate a probability model of exit into retirement using the UK Retirement Survey.
