Estimating, and interpreting, retirement income replacement rates


ESRI working papers represent un-refereed work-in-progress by researchers who are solely responsible for the content and any views expressed therein. Any comments on these papers will be welcome and should be sent to the author(s) by email. Papers may be downloaded for personal use only.

November 14, 2017 | ESRI Working Paper

front cover of working paper Authors: Sanna Nivakoski , Alan Barrett

Longitudinal data are used to estimate retirement income replacement rates of employees in Ireland who transition into retirement over the period 2010 to 2014. The median replacement rate is estimated at 50 per cent, with the mean at 78 per cent. The mean estimate seems high relative to stated policy goals but further analysis shows that the estimate results in part from very high replacement rates at the lower end of the income distribution. This in turn results from the flat-rate nature of social welfare pensions in Ireland. More broadly, Ireland’s pension system is shown to produce a more equal distribution of replacement rates compared to pre-retirement income. However, this leads to a question as to whether policy goals in the areas of pension adequacy should be set with respect to income or consumption levels as opposed to replacement rates.

© 2015 The Economic and Social Research Institute. All rights reserved. Website by JET Design