Population aging has led several countries to adopt policies that link the retirement age to life expectancy. Although such policies may be necessary to keep public finances sustainable, they risk increasing socioeconomic inequalities. Individuals with lower socioeconomic status tend to live shorter lives, collect benefits for fewer years, and may therefore be disproportionately burdened by increases in the retirement age, potentially undermining the intended progressivity of pension systems. An additional challenge is that the growing accumulation of private pension wealth may reduce the effectiveness of public pension reforms, as wealthier individuals can afford to retire early regardless of changes to the statutory retirement age. This chapter examines these dynamics and presents a range of policy options to best align pension design with demographic, socioeconomic, and fiscal realities.

Using a macro model with overlapping generations, this paper shows that increasing the retirement age may unintentionally reduce average hours worked (intensive margin), particularly depending on pension system design: the effect is stronger under pay-as-you-go systems with fixed benefits than under those with fixed contributions or voluntary savings.