Many OECD countries are currently undergoing reforms of their statutory pension schemes. In theory, a decrease of pension generosity can have a positive or negative effect on private savings - depending on the corresponding level of employment effects. Thus, it is an empirical question to determine the sign of the effect. A particular reform of the German Statutory Pension Scheme lifted the early retirement age (ERA) of women. The reform was implemented along birth cohorts, allowing for an intuitive identification strategy and causal interpretation of effects.
While previous studies found positive effects of other generosity decreasing pension reforms on private savings, this is the first study isolating the effect of an increase of the ERA on savings. An upward-shift of the ERA by 3 to 5 years has a statistically and economically significant negative effect on private monthly savings of single women. The effects in the subsample of couples are insignificant.