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Expected and actual replacement rates in the pension system of the Netherlands: how and why do they differ?

Authors
Publisher
Cambridge Univ Press
Publication Date
Keywords
  • Expected Retirement
  • Replacement Rate
  • Oaxaca Decomposition
  • Business And Economics
Disciplines
  • Education

Abstract

This study examines the expected retirement replacement rates (RRs) of several cohorts of Dutch employees at the time of their planned retirements. It also computes RRs based on the available pension records. We find that the expected replacement rate (E(RR)) is, in general, higher than the ones we compute. Larger discrepancies are found for younger cohorts and for individuals with less education and working experience. We also examine the difference between the expected and computed RRs and find that the mismatch is mostly related to poor institutional knowledge. We also show the role of assumptions about institutions and wage profiles in determining our results.

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