samlet årgang - Økonomisk Institut - Københavns Universitet

172
Average UIB rate pr. year
100
95
90
85
80
60 61 62 63 64 65 66
Before ’92 After ’92
NATIONALØKONOMISK TIDSSKRIFT 2005. NR. 2
Figure 1. The average annual rate of VERP benefits before and after the changes of
the VERP program in 1992. Percent of unemployment benefit. By retirement age.
Note: Reduced VERP benefits correspond to maximum 80 percent of unemployment benefit.
were increased on average, while the situation was unchanged for people retiring at
age 60-62 and age 65-66 (see Figure 1 below).
The 1992 changes meant that the financial incentives to delay early retirement from
60-62 to 63 were increased. The effect of the incentives to retire at age 64 is uncertain.
Certainly, VERP benefits for age 64 retirement were increased compared to the situation
before the change, and the benefit amount remained the same for age 65-66 retirees,
thereby increasing the incentives for age 64 retirement. However, the benefit amount
was also the same for retirement at age 63, which decreases the incentives for age 64
retirement. Typically, pension benefits are actuarially adjusted so that they are typically
higher per year when retirement is delayed; see e.g. Mitchell and Fields (1984).
However, people who delayed retirement from 63 to 64 were not compensated for
receiving benefits for a shorter period. Similarly, people who delayed retirement until
age 65 or 66 did not get any compensation either, and therefore, the incentives to
delay retirement until these ages were decreased. All in all, the aggregate effect of the
changes in the VERP policy on the average retirement age is uncertain. Provided that
the changes in the financial incentives had the intended effect, the effect on the average
retirement age depends on the distribution of the retirement age before 1992.
Actual benefit levels were the same at age 63 and 64 before and after the reform for
age 63 retirement. At age 65, benefits were around 11,000-13,000 Dkr. (1993-prices)
higher per year depending on previous earnings 11 after the reform, while this diffe-
11. In 1993, the ceiling for unemployment benefits was equal to 133,025 DKK. This amount was received if
previous earnings were equal to 147,806 DKK or above.