Analysing retirement age preferences and the effect of financial incentives on delaying retirement

Abstract

This survey analysis sought to examine retirement age preferences in Malta amongst fulltime employees born between 1959 and 1970, thus not yet reached the earliest age possible of 61 to retire and start receiving the contributory state pension. Only around a quarter of respondents would willingly keep on working at least until their statutory retirement age of 64 or 65, if they would be eligible to retire at 61. The analysis performed via logistic regressions shows that being closer to retirement, being more satisfied on-thejob, being the sole provider of finances in the household and higher educational attainment or having higher earnings significantly increase the odds to continue working as opposed to these variable’s opposites, upon controlling for other variables. A better health status and having a non-manual type job were also associated with not choosing to retire early, when regressed univariately. Moreover, literature suggests that financial incentives could have a positive influence on retirement age, though contentious on their impact. Employees initially choosing to retire early were proposed with increments to their pension for each year of delayed retirement, as in the scheme already in place in Malta. Nearly a third of these respondents increased their preferred retirement age, which is rather significant and results in an increase in the average retirement age of one year. Most factors were insignificant, though, in explaining whether an individual was influenced or not. Having a better health status was significant, implying that people anticipating less ability to work in the future take this into account and have lower odds of being influenced. The findings are relevant within a context of issues relating to having an adequate long-term pension income and the possibility of labour market shortages due to ageing in Malta. Moreover, the analysis shows that the option to extend the incentives for delayed claiming of one’s pension beyond the age of 65 could be considered, whilst still leaving the option to continue working and receiving a pension at the same time.