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Since 1 May 2009
Japan’s pension arrangements are fragmented and inefficient and lack coherence with the tax system. It could learn from other countries’ experiences as it faces up to the most significant ageing (and now reducing) population of all. Reform is not optional.
more
Despite reforms, the UK government is looking at further changes to pensions and age-related financial support. Changes might encompass increasing participation rates, ‘future-proofing’ the State Pension Age and integrating other welfare support. more
Rating agencies seem not to worry about a country’s ‘implicit pension debt’. In fact, using debt to reduce the IPD may be seen as counter-productive because it increases risk on account of now explicit debt. Privatising pensions from a position of surplus may be better (but may not). more
The US Tier 2 ‘Social Security’ requires at least 10 years’ contributions (or a qualified spouse) for a pension entitlement after age 62. About 4% of those aged 62-84 in 2010 won’t get a benefit. The group’s make-up is predictable; their unmet needs great. more
The US Social Security arrangements are subject to actuarial valuations that extend 70 years and more into the future. The discount rates are ‘soft’ and ‘under-price’ the net retirement liability by about one fifth. Should contributors and/or taxpayers be concerned? Probably not. more
As with nearly all other countries, Brazil is ageing. By 2050, 23% of citizens will be age 65+. Social security and social assistance will become ‘unaffordable’ and will need scaling back. It’s time to think about a new approach. more
US 401(k) plans are deferred remuneration with tax breaks. Higher-paid members tend to benefit particularly from the tax breaks while the lower-paid do better from the employer’s subsidy. Non-members miss out on both fronts. more
As in many countries, Canada is experiencing increasing labour force participation rates amongst older citizens. There is no single explanation but the news is good for the government for now, and improving. But mortality rates are still improving. more
What matters for growth seem to be income distribution, democratic institutions, openness to trade and foreign investment and a structure that favours manufacture and sophisticated exports. A stable macroeconomic environment also helps. Saving rates do not feature here. more
A US Commission has looked at ‘strengthening’ Social Security for ‘people of color’. The disadvantages they face after retirement are in fact the outcomes of lower career incomes and work discontinuities. These problems are not confined to minorities. more
Australia’s pension system has grown haphazardly and piecemeal-wise since the mid 1980s. The tinkering continues and the complexity grows. Is it working? It’s still apparently too early to tell but the system tends to encourage early retirement. That’s probably not a ‘good’ thing. more
India’s new (2004) pension arrangements move new civil servants from DB to DC and provide investment options for savers. That may interest private fund managers but doesn’t come close to meeting the needs of most Indian workers. more
Chinese households grew their saving rate to one quarter of disposable income in the ten years to 2005. Increasing private expenditure on housing, education and health care seems the best explanation. Then there are the data. more
The reunification of Germany provided a natural experiment that seemingly confirms the life cycle hypothesis. Older East Germans have higher saving rates, declining by age cohorts. That may have been precautionary behaviour but probably not. more
Ageing populations will test the capacity of New Zealand’s health and care systems in the next 20 years and beyond. The need for buildings, staff (and money) will about double as this survey of providers shows. more
Despite recent ‘reforms’ Thailand and Indonesian pensions are in a mess with either derisory DC or unrealistically high DB benefits. And the informal economy is large and growing. Both have “expensive, unsustainable and unjust” social security systems. more
Pre-funded pensions become more expensive with lower interest rates. PAYG, wage-indexed, state pensions are also indirectly affected as an analysis of the pension challenges faced by Cyprus shows. Shifting to prices-based indexation will help protect the Cypriot economy. more
Despite reforms, the UK government is looking at further changes to pensions and age-related financial support. Changes might encompass increasing participation rates, ‘future-proofing’ the State Pension Age and integrating other welfare support. more
Rating agencies seem not to worry about a country’s ‘implicit pension debt’. In fact, using debt to reduce the IPD may be seen as counter-productive because it increases risk on account of now explicit debt. Privatising pensions from a position of surplus may be better (but may not). more
The US Tier 2 ‘Social Security’ requires at least 10 years’ contributions (or a qualified spouse) for a pension entitlement after age 62. About 4% of those aged 62-84 in 2010 won’t get a benefit. The group’s make-up is predictable; their unmet needs great. more
The US Social Security arrangements are subject to actuarial valuations that extend 70 years and more into the future. The discount rates are ‘soft’ and ‘under-price’ the net retirement liability by about one fifth. Should contributors and/or taxpayers be concerned? Probably not. more
As with nearly all other countries, Brazil is ageing. By 2050, 23% of citizens will be age 65+. Social security and social assistance will become ‘unaffordable’ and will need scaling back. It’s time to think about a new approach. more
US 401(k) plans are deferred remuneration with tax breaks. Higher-paid members tend to benefit particularly from the tax breaks while the lower-paid do better from the employer’s subsidy. Non-members miss out on both fronts. more
As in many countries, Canada is experiencing increasing labour force participation rates amongst older citizens. There is no single explanation but the news is good for the government for now, and improving. But mortality rates are still improving. more
What matters for growth seem to be income distribution, democratic institutions, openness to trade and foreign investment and a structure that favours manufacture and sophisticated exports. A stable macroeconomic environment also helps. Saving rates do not feature here. more
A US Commission has looked at ‘strengthening’ Social Security for ‘people of color’. The disadvantages they face after retirement are in fact the outcomes of lower career incomes and work discontinuities. These problems are not confined to minorities. more
Australia’s pension system has grown haphazardly and piecemeal-wise since the mid 1980s. The tinkering continues and the complexity grows. Is it working? It’s still apparently too early to tell but the system tends to encourage early retirement. That’s probably not a ‘good’ thing. more
India’s new (2004) pension arrangements move new civil servants from DB to DC and provide investment options for savers. That may interest private fund managers but doesn’t come close to meeting the needs of most Indian workers. more
Chinese households grew their saving rate to one quarter of disposable income in the ten years to 2005. Increasing private expenditure on housing, education and health care seems the best explanation. Then there are the data. more
The reunification of Germany provided a natural experiment that seemingly confirms the life cycle hypothesis. Older East Germans have higher saving rates, declining by age cohorts. That may have been precautionary behaviour but probably not. more
Ageing populations will test the capacity of New Zealand’s health and care systems in the next 20 years and beyond. The need for buildings, staff (and money) will about double as this survey of providers shows. more
Despite recent ‘reforms’ Thailand and Indonesian pensions are in a mess with either derisory DC or unrealistically high DB benefits. And the informal economy is large and growing. Both have “expensive, unsustainable and unjust” social security systems. more
Pre-funded pensions become more expensive with lower interest rates. PAYG, wage-indexed, state pensions are also indirectly affected as an analysis of the pension challenges faced by Cyprus shows. Shifting to prices-based indexation will help protect the Cypriot economy. more
The US Social Security pension is based on a beneficiary’s lifetime earnings. Pension wealth reduces the effect of short-run volatility in incomes but not by much. High volatility seems associated with higher financial wealth but slightly lower relative Social Security wealth.
more
So-called ‘active-ageing’ is seen as a way to help control the health costs of ageing populations. In Austria, even if greater numbers are living better lives into old age, the number needing close care is also growing. Looking after their needs will be a challenge. more
The design of the US Social Security pension intends to pay a higher rate of benefit to the low paid over the high paid – it is ‘progressive’. The benefit’s income tax treatment can change that; but only by a bit. more
‘Income replacement rates’ are unhelpful to measure financial preparation for retirement. ‘Economic wellbeing’ matters and consumption is a measure of that. In the US, a ‘substantial majority’ have things under control. Some groups will have to reduce consumption. more
Argentina adopted the Chilean pension model but it didn’t seem to work. In the meantime, the Argentine government ran out of money and needed the pension assets. Each country has recently changed its system, trying to reduce pensioner poverty. more
If a Universal Pension reduces poverty amongst the old, we might expect to see positive changes in health and well-being. That seems to be so with Mexico’s universal pensions, as a natural experiment in the Yucatan seems to demonstrate. more
The rural pension scheme in China hasn’t got off to a good start. The NRPP seems unable to ‘attract’ younger contributors, so undermining its basis. Older citizens understandably support it but the young may have more attractive alternatives. more
Thailand’s means-tested Tier 1 was introduced in 1993, but few qualified despite elderly poverty levels. Local authorities administered the tests unevenly. In 2009, the monthly ‘Universal’ Pension (500 Baht) started. Pensioners went from 1.9 million to 5.65 million. more
In the US, seemingly generous Tier 3 pension entitlements do not mean that state-local workers have their retirement saving needs covered. That’s because they typically serve less-than-complete careers. Is that a worry? more
Paying for care in old age is a significant social issue. A UK Commission finds its current system “not fit for purpose….being confusing, unfair and unsustainable”. Life-time care costs should be capped at £35,000. Other administrative aspects need reform.
more
In a 2005 report, the IMF predicted that governments faced a squeeze between revenues and expected benefits from ageing populations. The roles of the state and private sectors require ‘rebalancing’. Reports on future projections require ‘scenario analyses’. more
A 2006 IMF report found Asia generally well-placed economically to deal with ageing populations. However, evidence ‘on the ground’ is mixed. Governments tend to avoid direct involvement with social insurance programmes. The potential problems will not go away. more
Some still think that encouraging the old to retire will reduce unemployment amongst younger people. Belgium proves the fallacy of this ‘connection’ (again). more
When tomorrow’s benefits exceed the capacity of earners to support them, something must give. Benefits must reduce either for all or just for those who can manage on their own. Means-tests present significant design issues for US policymakers. more
Sub-Saharan Africa illustrates two main models of social protection – the South African-style social pensions and newer income-transfers that are replacing some emergency programmes. If the new schemes are to last, they must be cemented in politically. more
In 1998, Hungary swapped part of its public pension for a compulsory Tier 2 scheme. Membership was initially voluntary and 50% joined. Tier 2 didn’t ‘work’ and has been effectively nationalised and used to fund tax reductions. Time to reflect.
more
People are generally healthier at older ages and so ‘should’ be working longer. However, US data suggests that averages need analysis. The less well-educated, lower-paid have significantly lower healthy life expectancy averages and may not be able to work until the State Pension Age. more
So-called ‘active-ageing’ is seen as a way to help control the health costs of ageing populations. In Austria, even if greater numbers are living better lives into old age, the number needing close care is also growing. Looking after their needs will be a challenge. more
The design of the US Social Security pension intends to pay a higher rate of benefit to the low paid over the high paid – it is ‘progressive’. The benefit’s income tax treatment can change that; but only by a bit. more
‘Income replacement rates’ are unhelpful to measure financial preparation for retirement. ‘Economic wellbeing’ matters and consumption is a measure of that. In the US, a ‘substantial majority’ have things under control. Some groups will have to reduce consumption. more
Argentina adopted the Chilean pension model but it didn’t seem to work. In the meantime, the Argentine government ran out of money and needed the pension assets. Each country has recently changed its system, trying to reduce pensioner poverty. more
If a Universal Pension reduces poverty amongst the old, we might expect to see positive changes in health and well-being. That seems to be so with Mexico’s universal pensions, as a natural experiment in the Yucatan seems to demonstrate. more
The rural pension scheme in China hasn’t got off to a good start. The NRPP seems unable to ‘attract’ younger contributors, so undermining its basis. Older citizens understandably support it but the young may have more attractive alternatives. more
Thailand’s means-tested Tier 1 was introduced in 1993, but few qualified despite elderly poverty levels. Local authorities administered the tests unevenly. In 2009, the monthly ‘Universal’ Pension (500 Baht) started. Pensioners went from 1.9 million to 5.65 million. more
In the US, seemingly generous Tier 3 pension entitlements do not mean that state-local workers have their retirement saving needs covered. That’s because they typically serve less-than-complete careers. Is that a worry? more
Paying for care in old age is a significant social issue. A UK Commission finds its current system “not fit for purpose….being confusing, unfair and unsustainable”. Life-time care costs should be capped at £35,000. Other administrative aspects need reform.
more
In a 2005 report, the IMF predicted that governments faced a squeeze between revenues and expected benefits from ageing populations. The roles of the state and private sectors require ‘rebalancing’. Reports on future projections require ‘scenario analyses’. more
A 2006 IMF report found Asia generally well-placed economically to deal with ageing populations. However, evidence ‘on the ground’ is mixed. Governments tend to avoid direct involvement with social insurance programmes. The potential problems will not go away. more
Some still think that encouraging the old to retire will reduce unemployment amongst younger people. Belgium proves the fallacy of this ‘connection’ (again). more
When tomorrow’s benefits exceed the capacity of earners to support them, something must give. Benefits must reduce either for all or just for those who can manage on their own. Means-tests present significant design issues for US policymakers. more
Sub-Saharan Africa illustrates two main models of social protection – the South African-style social pensions and newer income-transfers that are replacing some emergency programmes. If the new schemes are to last, they must be cemented in politically. more
In 1998, Hungary swapped part of its public pension for a compulsory Tier 2 scheme. Membership was initially voluntary and 50% joined. Tier 2 didn’t ‘work’ and has been effectively nationalised and used to fund tax reductions. Time to reflect.
more
People are generally healthier at older ages and so ‘should’ be working longer. However, US data suggests that averages need analysis. The less well-educated, lower-paid have significantly lower healthy life expectancy averages and may not be able to work until the State Pension Age. more
‘Knowing’ how long you might live in retirement should be central to decumulation decisions; even your chosen retirement date. US Social Security lets beneficiaries choose their starting date. Financially, they seem consistently to get that decision wrong.
more
An ILO report recommends the adoption of a ‘social protection floor’ in developing countries. For the old, a ‘basic, non-contributory pension’ seems the most efficient way of achieving that. As an aside, developed countries might learn something as well. more
Countries with some form of compulsory, Tier 2 retirement savings arrangement must have rules about who can invest those savings in the accumulation phase. The choices of ‘AFORE’ by Mexican employees seem ‘sub-optimal’ with consumers confused by the ‘noise’. more
Before the current (2008 to ?) fiscal crisis in the Euro countries, it was apparent that ageing populations would strain compliance with the Stability and Growth Pact. As it has turned out, future pensions are currently the least of the EU’s worries. more
US Social Security intends to redistribute from higher to lower earners. What look like reasonably progressive benefits become less progressive when lifetime incomes and mortality are allowed for. Other supportable adjustments turn it regressive. more
Comparing just pension systems in different countries is difficult. Worse, such limited comparisons are simplistic. Germany and Australia have very different systems. Comparing just the pensions misleads rather than illuminates. more
The Seychelles should be on the list of countries with a Universal Pension. A monthly $US196 is paid to all from age 63 after five years’ residence. It started in 1979 after the 1977 Marxist coup. Since a return to democracy in 1993, the pension continues. more
The OECD has taken a look at ‘long term care’ across its member countries. A comprehensive comparison offers a backdrop for a discussion on policy options for governments that all face much higher future LTC bills. more
The EU requires the Czech government to improve its fiscal position to comply with limits on deficits and debt. A 2008 report looks at the long-term implications of tax and benefit changes. Pre-funding pensions may help (apparently). more
‘Proxy means testing’ is apparently a more objective way of targeting households that really need financial help. This matters where anti-poverty programmes are used as a form of aid. For a number of reasons, the PMT is deeply flawed statistically. more
The US has significant poverty issues amongst its retired population. Social Security, in its present format can’t address them directly so benefit changes are needed, targeted at the poor. Given fixed contributions, some must expect lower future benefits. more
When state benefits are tied closely to work income, minorities tend to end up with lower than average retirement benefits as the UK’s arrangements demonstrate. The same applies to women, and the disabled. more
Brazil’s changes to old-age benefits in 1991 show the power of incomes on labour participation rates. About 40% of the entitled chose to stop working. This apparently justifies means tests to limit the damage to labour markets. Perhaps. more
In the US, Social Security contributions and benefits are partly related to pay, but with a ceiling. The so-called ‘tax max’ has changed each year since 1982, in relation to a national wage index so is unchanged in real terms since then. more
The OECD reviews coverage amongst ‘voluntary funded’ plans in several countries (in 2008). An ‘uneven’ distribution means there is a need to increase coverage amongst the young and low-income earners. The OECD lays out the policy options. more
The challenges of New Zealand’s ageing population are examined in a cost-benefit framework. Greater intervention by the government seems indicated, including expanding private saving schemes and increasing tax breaks as the Tier 1 pension reduces. more
An ILO report recommends the adoption of a ‘social protection floor’ in developing countries. For the old, a ‘basic, non-contributory pension’ seems the most efficient way of achieving that. As an aside, developed countries might learn something as well. more
Countries with some form of compulsory, Tier 2 retirement savings arrangement must have rules about who can invest those savings in the accumulation phase. The choices of ‘AFORE’ by Mexican employees seem ‘sub-optimal’ with consumers confused by the ‘noise’. more
Before the current (2008 to ?) fiscal crisis in the Euro countries, it was apparent that ageing populations would strain compliance with the Stability and Growth Pact. As it has turned out, future pensions are currently the least of the EU’s worries. more
US Social Security intends to redistribute from higher to lower earners. What look like reasonably progressive benefits become less progressive when lifetime incomes and mortality are allowed for. Other supportable adjustments turn it regressive. more
Comparing just pension systems in different countries is difficult. Worse, such limited comparisons are simplistic. Germany and Australia have very different systems. Comparing just the pensions misleads rather than illuminates. more
The Seychelles should be on the list of countries with a Universal Pension. A monthly $US196 is paid to all from age 63 after five years’ residence. It started in 1979 after the 1977 Marxist coup. Since a return to democracy in 1993, the pension continues. more
The OECD has taken a look at ‘long term care’ across its member countries. A comprehensive comparison offers a backdrop for a discussion on policy options for governments that all face much higher future LTC bills. more
The EU requires the Czech government to improve its fiscal position to comply with limits on deficits and debt. A 2008 report looks at the long-term implications of tax and benefit changes. Pre-funding pensions may help (apparently). more
‘Proxy means testing’ is apparently a more objective way of targeting households that really need financial help. This matters where anti-poverty programmes are used as a form of aid. For a number of reasons, the PMT is deeply flawed statistically. more
The US has significant poverty issues amongst its retired population. Social Security, in its present format can’t address them directly so benefit changes are needed, targeted at the poor. Given fixed contributions, some must expect lower future benefits. more
When state benefits are tied closely to work income, minorities tend to end up with lower than average retirement benefits as the UK’s arrangements demonstrate. The same applies to women, and the disabled. more
Brazil’s changes to old-age benefits in 1991 show the power of incomes on labour participation rates. About 40% of the entitled chose to stop working. This apparently justifies means tests to limit the damage to labour markets. Perhaps. more
In the US, Social Security contributions and benefits are partly related to pay, but with a ceiling. The so-called ‘tax max’ has changed each year since 1982, in relation to a national wage index so is unchanged in real terms since then. more
The OECD reviews coverage amongst ‘voluntary funded’ plans in several countries (in 2008). An ‘uneven’ distribution means there is a need to increase coverage amongst the young and low-income earners. The OECD lays out the policy options. more
The challenges of New Zealand’s ageing population are examined in a cost-benefit framework. Greater intervention by the government seems indicated, including expanding private saving schemes and increasing tax breaks as the Tier 1 pension reduces. more
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