Changes in Pension Incentives through Time

Abstract

A common assumption in the compensation and retirement literature, often necessitated by lack of data, is that company-sponsored pensions are static institutions. The present paper, a study of the pension plans at 14 companies for the years 1960, 1970, and 1980, challenges this assumption, showing that pension schemes are actually quite dynamic over time. Specifically, the authors find that in 1960 all 14 pension plans tended to reward delayed retirement, but by 1980 many of the union plans actively encouraged early retirement. Nonunion plans in the sample, however, rewarded deferred retirement in all three years. The observed changes in pension incentives may have resulted in part from statutory increases in the age at which workers can be forced to retire by an employer.