CAIRN-INT.INFO : International Edition

The premium is a bonus pension rate introduced by the 2003 pension reform. It has sparked debate, both in terms of its cost and its ability to meet the announced target of helping keep people in employment after age 60. The issue is still topical because what emerged between 2004 and 2006 was the premium’s relative failure to achieve the expected outcomes. Is the pension premium a waste of resources that fails to achieve its aim? The first part of the article identifies the sub-population concerned by the premium over the period from 2004 to mid-2007. This group consists mainly of men, most of whom are entitled to pensions from more than one scheme, and 60% of whom qualify for at least one year at the premium rate. The main feature distinguishing them from other insured is their propensity to be in employment before the legal retirement age, to earn an above-average salary, and frequently to have managerial status. The low use of the premium by the insured would seem to be attributable to the cumulative weakness of three factors: the employment rate of seniors, the willingness of employers to retain seniors, and information about the premium. The second part of the article tests the application of a Stock & Wise model used to determine the projected retirement age in some microsimulation models. The exercise was performed on a specific sub-population of insured eligible for the premium between 2004 and 2006 whose recent retirement date is known. In order to model the behaviour of insured retiring with a premium, some parameters in the model had to be revised. In particular, the value of preference for leisure generally used was revised up. However, optimal determination of the retirement date is highly sensitive to variations in the value of parameters and the population filter chosen. More generally, this methodology will remain relatively fragile as long as the insured lack real freedom of choice about their retirement date, mainly due to the attitude of companies towards older workers, but also to non-financial factors that influence the decision to retire.

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