Early Pension Claiming and Expected Longevity: A Register-Based Study on the Take-up of the Partial Old-Age Pension in Finland

Abstract

As of February 2017, Finns have been able to claim a partial old-age pension early at age 61 independent of their working hours or earnings. Focusing on the take-up of the partial old-age pension in Finland, this article investigates whether early pension claiming is associated with expected longevity. We assume parental longevity to signal expected longevity. We use total register data on those eligible to claim a partial pension at age 61 in 2018 or 2019 and link this data to the information on their parents’ birth and death dates. To our knowledge, there exists no previous register-based study that uses parental longevity to explain pension claiming behavior. Since the longevity of the same-sex parent in particular influences subjective life expectancy, the variables of interest were the same-sex parent being alive and the age (at death) of the same-sex parent. The baseline results show a negative connection between the same-sex parent being alive and claiming. The connection disappears after controlling for gender, but the negative connection between the age (at death) of the same-sex parent and the claiming remains significant in a fully adjusted model. Known risk factors for shorter longevity, such as being male, having a lower income and wealth, also increase the likelihood of claiming. The results indicate that people take their expected longevity into account when making pension claiming decisions. This may hold critical implications for actuarial neutrality, the key assumption of the pension system design, and can lead to an unexpected increase in public pension expenditure.