An Easily Understood and Intergenerationally Equitable Normal Pension Age

Sanderson, W.C. & Scherbov, S. ORCID: https://orcid.org/0000-0002-0881-1073 (2014). An Easily Understood and Intergenerationally Equitable Normal Pension Age. IIASA Interim Report. IIASA, Laxenburg, Austria: IR-14-020

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Abstract

Pension arrangements are in the process of changing in most OECD countries. These changes often include changes in normal pension ages. Several rationales are commonly given for changes in normal pension ages, including financial exigency and increases in life expectancy, but the public remains largely unconvinced. Here we use the methodology of the characteristics approach to the measurement of population ageing to derive a simple and transparent procedure, based on principles of equity that produces analytically-based normal pension ages. Forecasts of our normal pension ages are generally quite close to country plans. Episodic changes in normal pension ages could get more difficult as populations age. We recommend that policy-makers consider setting normal pension ages automatically, based on changes in mortality rates, using the simple, transparent, and equitable procedure provided here.

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