Shattered Dreams: The Effects of Changing the Pension System Late in the Game

Authors

  • Andries De Grip,

    1. ROA, Maastricht University IZA, and Netspar
      VU University Amsterdam, Tinbergen Institute, HEB IZA, and Netspar
      ROA, Maastricht University and IZA
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  • Maarten Lindeboom,

    1. ROA, Maastricht University IZA, and Netspar
      VU University Amsterdam, Tinbergen Institute, HEB IZA, and Netspar
      ROA, Maastricht University and IZA
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  • Raymond Montizaan

    1. ROA, Maastricht University IZA, and Netspar
      VU University Amsterdam, Tinbergen Institute, HEB IZA, and Netspar
      ROA, Maastricht University and IZA
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  •  Corresponding author: Maarten Lindeboom, Department of Economics, VU University, Amsterdam, De Boelelaan 1105, 1081 HV Amsterdam, The Netherlands. Email: mlindeboom@feweb.vu.nl.
    We gratefully acknowledge ABP for making the administrative data available. We acknowledge the comments and suggestions of Lex Borghans, Norma Coe, Thomas Dohmen, Owen O'Donnel, Arnaud Dupuy, Hans van Kippersluis, Ben Kriechel, Jörn-Steffen Pischke, Jan Sauermann, two referees and seminar participants at Pompeu Fabra Barcelona, the University of Sheffield, the Netspar Theme Conference on Health and Retirement, ESPE and EALE.

  •  Until 1 January 2002, pension benefits were calculated using wage earnings in the year prior to retirement. Since 2002, pension benefits have been calculated using average annual earnings.

Abstract

This article assesses the impact of a dramatic reform of the Dutch pension system on the mental health of workers nearing retirement age. The reform means that public sector workers born on 1 January 1950 or later face a substantial reduction in their pension rights while, for workers born before 1950 nothing changes. We employ a unique-matched survey and administrative dataset comprising male public sector workers born in 1949 and 1950 and find a strong deterioration in mental health for workers affected by the reform. These effects are stronger for married workers whose partner has no pension income.

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