Pensions

Social security pension and the effect on household saving

This paper examines the substitution between pension wealth and household saving by studying Norway’s 2011 pension reform. The analysis identifies the effect of reductions in social security pension generosity on household saving using cohort, time, and sector variation in pension wealth induced by the reform. Our study focuses on saving behavior between ages 57-61 for the 1954- 1956 birth cohorts, who are the first three birth cohorts affected by a reduction in future pension wealth due to the reform. We find that they increased their saving rate by around 1.2 percentage points (annually) after the reform, which corresponds to a five-year increase in household saving of about 27,000 NOK. When taking into account the remaining life-cycle changes to household saving, this corresponds to an offset effect of about 56 percent of the total loss in pension wealth.

Social security pension and the effect on household saving, with Jia Zhiyang, Herman Kruse, and Trond Vigtel, Scandinavian Journal of Economics

Bidrar folketrygdens pensjonssystem til inntektsutjevning i et livsløpsperspektiv? (Is the National Insurance pension system progressive in a lifetime perspective?)

Hensikten med artikkelen er å undersøke om det reformerte pensjonssystemet i folketrygden omfordeler fra rik til fattig i et livsløpsperspektiv, også når vi tar hensyn til forskjeller i forventet levealder og i tilbøyeligheten til å jobbe lenger mellom utdannings- og inntektsgrupper. Analysen er gjennomført ved hjelp av mikro-simuleringsmodellen MOSART for individer født i 1963. Resultatene viser at det reformerte pensjonssystemet i folketrygden er svakt omfordelende. En spesielt progressiv beskatning av pensjonsinntekt bidrar vesentlig til resultatet. Den gjenstående omfordelingen fra rik til fattig er konsentrert i ytterkantene av inntektsfordelingen, mens systemet i beste fall ser ut til å være nøytralt i et klasseperspektiv. 

The purpose of this article is to investigate whether the reformed Norwegian National Insurance pension system redistributes from rich to poor in a lifetime perspective, also when taking account of differences in life-expectancy and the propensity to prolong working life between educational and income groups. The analysis uses a micro-simulation model, MOSART, applied to individuals born in 1963. The results show that the reformed pension system is indeed weakly progressive, partly due to a particularly progressive system of pensioner taxation. The remaining progressive redistribution is concentrated in the tails of the life-time income distribution, while the system appears to be neutral at best in terms of cross-class redistribution among wage earners. 

Bidrar folketrygdens pensjonssystem til inntektsutjevning i et livsløpsperspektiv? med Axel West Pedersen, Søkelys på arbeidslivet 2022

Pension Wealth in Norway

Pensjonsformue i Norge 2019-2020, med Aslak Hetland, Rapporter 2023/21, Statistisk sentralbyrå

Pensjonsformue i Norge 2018, med Aslak Hetland, Rapporter 2021/16, Statistisk sentralbyrå

Pensjonsformue i Norge 2017, med Per Ove Smogeli, Rapporter 2019/28, Statistisk sentralbyrå

Beregninger av pensjonsformue, med Dennis Fredriksen, Rapporter 2019/29, Statistisk sentralbyrå

The Dynamic Cross-sectional Microsimulation Model MOSART

Based on a cross-section of the Norwegian population and a comprehensive set of characteristics MOSART is one of the longest running and actively used models in the family of dynamic microsimulation models. The first version was operative in 1990, and its main use has been projections and policy analyses regarding the design and evaluation of the Norwegian pension system. The aim of the paper is to provide an updated overview of the model with technical platform, comparison with other dynamic microsimulation models, the main events included and its main use.

The Dynamic Cross-sectional Microsimulation Model MOSART, with Leif Andreassen, Dennis Fredriksen, Hege M. Gjefsen, and Nils M. Stølen, International Journal of Microsimulation, 13(1), 92-113, 2020.

Closing the Gender Gap in Pensions

In this article, we use an advanced microsimulation model to study the distributional effects of the reformed Norwegian pension system with a particular focus on gender equality. The reformed Norwegian system is based on the notional defined contribution (NDC)-formula with fixed contribution/accrual rates over the active life-phase and with accumulated pension wealth being transformed into an annuity upon retirement. A number of redistributive components are built into the system: a unisex annuity divisor, a ceiling on annual earnings, generous child credits, a possibility for widows/widowers to inherit pension rights from a deceased spouse, a targeted guarantee pensions with higher benefit rates to single pensioners compared to married/cohabitating pensioners, and finally a tax system that is particularly progressive in its treatment of pensioners and pension income. Taking complete actuarial fairness as the point of departure, we conduct a stepwise analysis to investigate how these different components of the National Insurance pension system impact on the gender gap in pensions and on general (Gini) inequality in the distribution of pension income within a cohort of pensioners. Our analysis concentrates on one birth cohort – individuals born in 1963 – and we study three different outcomes: the distribution of annual pensions early in retirement (at age 70), the distribution of the total sum of pension benefits received over retirement, and the distribution of the average annual pension benefits received over the retirement phase. In addition, we look at three alternative income concepts. These are personal income, equivalised household income, and finally an original income concept developed for this study: personal income adjusted for the economies of scale enjoyed by couple households. 

Closing the gender gap in pensions. A microsimulation analysis of the Norwegian NDC pension system, with Axel West Pedersen, Journal of European Social Policy, 29(1), 130-143, 2019.