Who would be willing to pay for early retirement?


Over the past decade governments of all political persuasions around the world have found themselves struggling with how to fund the ever-escalating cost of pension provision for their ageing populations and the erosion of traditional pension tools such as annuities.


A number have taken imaginative approaches to the problem, such as the UK government’s decision to allow the over 55s to access their pension pots with few, if any, restrictions and making a quarter of any draw down free of personal tax. However, the most common approach to the problem has been what is perhaps the most obvious one – to make people work longer before state support clicks in.

An example of this came in 2011 when the Italian government instituted reforms, with very short notice, which meant that a significant percentage of the population were faced with the prospect of working up to seven years longer than they had anticipated.

Perhaps not surprisingly, these changes were met with little enthusiasm amongst those affected, particularly given the fact that Italy, like several of its Mediterranean neighbours, is a country where grandparents – and specifically grandmothers – traditionally plug gaps in state-sponsored childcare services.

Given the high level of resentment against the reforms, what my department at emlyon business school and my colleagues at CeRP-Collegio Carlo Alberto were interested in was whether individuals would actually be willing to pay for the right to cut down their time in the workplace – whether early retirement was actually important enough for them to make a financial sacrifice to achieve it.

Our survey of over 500 Italian workers hit by the changes found that, while there was a definite and widespread desire for early retirement, there was very little willingness to pay to make it a reality. Only one group, namely grandmothers with a sharp eye on an upcoming and important childcare role in prospect, differed from the majority and were not only willing to pay for the privilege of early retirement, but also pay significantly more than those women whose circumstances meant they were unlikely to figure in the childcare equation.

Interestingly, this reluctance to pay was widespread outside the ‘grandmother group’. Even workers who were directly hit by the reform were not willing to pay for early retirement. This reluctance to pay for early retirement was also not affected by whether an individual understood the need for reforms – namely the sorry state of the Italian economy at the time and the consequent need to shape a more robust and sustainable pension system – or not. But why was this? The problem seemed to be that, while some of our respondents certainly seemed to grasp the need for pension reform on an intellectual level, few did so on a ‘gut’ basis. Our findings suggest that there is a widespread feeling – and probably not just in Italy, but also in any country where the concept of state subsidised retirement is well-established – that pensions are an ‘acquired right’, a promise that the state has a duty to honour, irrespective of the overall cost to society or the general economic situation. And this perception (or misperception) appears to be a direct legacy of formerly generous, perhaps even over-generous, pension systems.

Governments face a tough enough challenge as it is when it comes to creating sustainable pension strategies given the increasingly challenging demographic situation in so many countries. However, there does seem some glimmer of hope. Our research showed that where individuals genuinely understand the reasons for changes to retirement benefits, and such pension reforms are accompanied by complementary social policies that help households to cope with the negative impact of the reforms, then resistance to them does weaken. The key challenge is then, perhaps, not the actual creation of a sustainable system, but clear and compelling communication about it to all those who will be affected. Because, unless ‘hearts and minds’ can be won, then the road to sustainability in this all-important area of public policy looks very rocky indeed.


Riccardo Calcagno


Financial economist as training, I have been a professor of finance at emlyon business school since 2011. I hold a PhD from the Catholic University of Louvain (Belgium). My research focuses on information economics and its applications to household finance and corporate finance. I have worked on various topics such as financial literacy and financial advice, mergers and acquisitions and the problems inherent to the negotiation processes behind them, the design of managerial compensation. I previously worked at the University of Tilburg and at the Free University of Amsterdam (VU). I have published articles in various academic reviews, such as the Review of Economic Studies, the Journal of Corporate FinanceCorporate Governance: An International Review and the Journal of Banking and Finance, among others.

More information on Riccardo Calcagno:
• His CV online
• His ResearchGate page


Further readings…

  • Moscarola F. C., Calcagno R., Fornero E. (2017). Too busy to stay at work : How willing are Italian workers “to pay” for earlier retirement? Economics Bulletin, 37 (3), 1694-1707.
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