The Financial Structure of Early-Retirement Pensions

Abstract

In popular imagination the idea of a “pension benefit”—whether the benefit payments of a private-pension scheme or those of a public scheme such as Social Security—most often elicits images of “reward” and “old-age security.” The benefit of a pension is thought to be, at the individual level, a more or less proportionate reward for having completed a “productive work life” and, at the population level, a means of alleviating the risk of old-age poverty. That thought is correct so far as it goes—though the tendency sometimes is to confuse the “reward” aspect with a free good and to assume that “old-age security” is only a matter of money income.