Actuarial Adjustments , Retirement Behaviour and Worker Heterogeneity

The behavioural response with respect to actuarial adjustments in the German public pension system is analysed. The introduction of actuarial adjustments serves as a source of exogenous variation to estimate discrete time transition rates into retirement. The analysis is conducted on administrative data from social security records and on survey data in a comparative scenario. Probability mass points that occur for institutional reasons and due to social norms are controlled for. Moreover, worker heterogeneity is taken into account, which has not been addressed in the previous literature. The results show that on average retirement is postponed by fi ve months due to fi nancial incentives via actuarial adjustments. However, this response is about 40 per cent lower for manual workers compared to non-manual workers which indicates that their retirement income may deteriorate. JEL Classifi cation: C41, H55, J26