Pension Reforms

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Anyone who has to understand the complex UK pension system (public and private) needs this Pensions Primer. The system is already complicated and over the next few years will become much more so. more

The Indian government has nearly doubled the number of Tier 1 social pensions it provides to the elderly poor. Paradoxically, this might increase the incidence of elderly poverty. more

Not many countries have a universal (Tier 1) pension. Mauritius (pop. 1.3 m; GDP per capita now $US5,500) started one in 1950 almost by accident when it was a lot poorer. It experimented twice with income tests but now everyone over 60 gets a pension. more

Very poor countries face few choices when it comes to pensions for the elderly. A universal, Tier 1 pension is the most effective way of delivering economic assistance to the old. The experience of Lesotho shows that Tier 1 can have social advantages as well. more

South Africa proposes to replace its existing pension arrangements with a universal Tier 1 pension and a dual, compulsory Tier 2 that is divided between a DB, PAYG arrangement and a DC, pre-funded scheme. The World Bank’s thinking has had a significant influence.
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Much statistical information about Japanese pension plans, the elderly and other data that affect economic trends and analysis is drawn together in a single web site. more

Putting money aside against the possibility of periods of unemployment seems a sensible strategy. Canadian evidence shows that citizens, on average and on balance, are indeed sensible.
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This brief paper highlights a fundamental flaw in EU pension systems – the raw deal women get. The ‘at risk of poverty’ numbers are quite stark, particularly at the older ages. They may get a bit better as more women work longer and earn their own benefits.
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If citizens don’t understand some basic financial concepts, they can’t be expected to make sensible decisions about investment products, such as for retirement saving. The UK government is worried about the “financial capability” of its people; a gap that is partly of the government’s own making.
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Australia forces its citizens to save for retirement, so they save more don’t they? Perhaps but perhaps not; and anyway, seemingly not enough. Sterner measures are indicated. more

When the UK government decided that it wanted to control how citizens save for retirement through “personal accounts”, it signed up to the rules that would be needed – such as the fees the state monopoly will let providers charge.
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In the US, poverty levels amongst older, unmarried women are high. Social Security family benefits – pensions for spouses, widows, divorcees – are useful, but leave many in poverty. Changes in benefit rules might help a little; but probably won’t. more

Defined Contribution schemes with investment choice should let members tailor their investment strategy to their preferences and saving objectives. That’s the theory. In practice, few US scheme members take an active interest and many of those act other than in their own best interests. more

This report aims to inform the US public about the 75 year financing options for Social Security. It assumes that Social Security stays in much its present form. Other options are possible. more

New Zealand now reviews its retirement income environment every three years. The 2007 Review, like reviews preceding it, found a lot right with what has happened (and is happening) but also raises some large question marks. more

Government interventions in the UK’s retirement income system are complex and that looks set to worsen over coming years. Will that improve relatively high levels of pensioner poverty? Perhaps not. more

The wealth and income of older Americans changes a lot in retirement. Between ages 67-80, the income for about 40% declines, 40% increases and about 20% stays the same. How so? more

Do rich Canadians save more than others? The answer depends on how lifetime income is measured – using consumption of non-durables as an “instrument”, it seems not, except in comparison with the poorest quintile (who simply do not save). more

Chileans face a complex decision whether or not to buy an annuity on retirement. New evidence identifies some of the decision’s drivers. It also illustrates the complexities of state control when taxpayers may have to meet part of cost of retirees’ decisions. more

The UN has summarised demographic data from around the world and sorts countries into three groups. The improving human condition raises future challenges as countries learn to cope with ageing populations. more

Aggregate and household saving numbers present commentators with a number of problems. Does the life-cycle hypothesis help us to understand them or can things be re-defined to make the model fit the facts? Perhaps a country’s institutions also affect how saving is measured – and then there is the impact of PAYG state pensions. more

If citizens are to take greater responsibility for their retirement incomes, they need to understand the issues. In the US, there is widespread financial illiteracy and the US is not alone. Resolving that won’t be easy but we should start somewhere. more

Many developed countries worry about the recent, steep increase in household debt. In the US, this seems to follow demographic influences, rising house prices and financial innovation. Should policymakers be concerned? Markets may have already begun the adjustment.
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Looking at just direct social expenditure by governments doesn’t really tell the full story. Tax interventions (direct, indirect and concessions) should also be included. This report looks at 23 (of 30) OECD countries and tries to provide a more comprehensive total. more

The OECD has gathered together information from nine member countries (and a number of others) about the way different retirement saving arrangements work on the ground. It does not purport to deliver policy conclusions, and tends to take as a given that choice is costless and good. more

The UK’s pension arrangements will become fairer, more complex, more expensive and will take decades to implement fully. The consensus view of local experts seems to be that the new system will be better but not good enough. more

Knowing how long pensioners might live is essential to the viability of private annuity markets. Commercial survival (of the annuity provider or even a Defined Benefit plan’s sponsor) depends on managing the longevity risk. Perhaps governments have a role to play in promoting a “private market solution” – longevity-indexed bonds. more

This 13 country look at the rules governing the funding of occupational Defined Benefit pension plans makes recommendations for their future regulation. “Best practice” funding and actuarial costing methods are described. more

New Zealand has been worrying a lot about public policy on monetary and fiscal framework. Inflation really matters to long-term savers and New Zealand’s Reserve Bank is currently struggling to maintain that within its target. This report suggests there is not too much wrong. more

This IMF working paper advocates a radical “new approach” to pension reform in China that consists essentially of abandoning the current old in order to focus on pre-funding old age pensions for all of today’s young workers. Not good enough. more

This IMF working paper promises a primer on “public pension reform", but delivers less. It focuses largely on a proposal to add personal accounts to the US Tier 2 state-provided pension, known as "Social Security". more

The experience of rich countries in developing social assistance programmes has lessons for developing countries. It seems that the more comprehensive and universal the programmes are, the more likely they are to build cohesive countries with lower poverty and greater growth. Mind you, rich countries have messed up as well. more

Where retirement pensions depend on work history, women’s entitlements tend to be ‘derived rights’ that follow the death of the former employee. Derived rights seem associated with pensioner poverty. Poverty rates are already on the rise amongst single older women - without change, there will be even more poor, older women. more

Financial planning for retirement in the US seems to be associated with higher wealth. Planning activity is strongly correlated with financial literacy and it seems that not much literacy (or planning) is needed to make a difference. Perhaps a role for employers rather than regulators? more

There is a new way of measuring Americans’ financial preparedness for retirement – the National Retirement Risk Index. It seems to show a gradual disconnect between future retirees’ pre-retirement incomes and the amounts they will have to live on. Should we be worried? more

Without changes, average public debt in the EU region will grow from today's 63% of GDP to more than 200% of GDP by 2050. Most of that is pension-related but increases in health costs are not trivial. EU countries are divided into high, medium and low risk countries but the measurement basis raises questions. more

Rich countries tend to run Current Account Deficits (CADs). Some say that the countries are spending more than they earn; that it can’t last and, perhaps, that retirement saving must become compulsory. Should the government worry about CADs? That’s a simple question – the answer may be “perhaps not”. more

‘Redistribution of resources across age has always been centrally important throughout human history’. As the retired population demands a greater share of resources, that should not be at the expense of investment in children. Perhaps that should be protected. more

Worriers think that, as baby boomers retire and start running down their assets, prices of houses, shares and other property will fall. New evidence indicates that this may not happen. In fact, the reverse may be true because households seem to keep saving in retirement. more

Private, Defined Benefit, Tier 2 pensions are an important part of many countries’ pension arrangements but sponsoring employers seem to be seeing more negatives than positives in their DB schemes. Perhaps the Law of Unintended Consequences is at work again. more

In 2000, the Reserve Bank of Australia didn’t know whether Australia’s compulsory Tier 2 had increased ‘household saving’. This 2004 paper thinks the effect is now measurable (and positive). The question remains whether the costs justify the intervention. more

Increases in housing wealth seem to affect spending in the US more than increases in the value of financial assets. Housing wealth tends to be spent on non-durables while financial wealth tends to affect spending on durables. more

Public PAYGO pensions in Norway at both Tier 1 and Tier 2 are generous. Oil revenues have reduced the pressure for change. The 2005 reforms promise to reduce costs and improve labour incentives to work but will be more complicated. Private Tier 2 schemes are also now compulsory. more

In most developed countries, housing comprises a large share of households’ wealth. People worry about how the recent run-up in prices affects consumption. US data is re-analysed - the long-run effect is to increase consumption by about 9 cents for each dollar of increase. Responses to price changes seem sluggish. more

The living standards of different types of households cannot be adequately measured without asking the people affected how they are managing and how they perceive their living conditions. That must be done in a systematic way. A new measure allows living standards to be compared across groups and over time. more

Many think that ageing populations will see reducing future returns from capital markets. But that ignores the implications of open world markets for labour and capital. Perhaps the life cycle model isn’t the best explanation for what might happen. more

A comprehensive look at US data shows that retirement incomes may be less of a problem than retiree medical costs. Other patterns are more familiar (ageing changes) but perhaps more public attention should be directed at public programmes. more

Ageing populations present product design challenges for providers when they try to match customers’ assets with income needs. We need to know more and to understand why some products aren’t successful. Supra-national solutions may be indicated. more

The health and expected mortality of US citizens at about retirement age has improved markedly over 40 years to 2000. Do those, on their own, justify raising the eligibility age for the state pension? Possibly but more work is needed. more

While population growth is gradually levelling off, the shape of the global population will continue changing as the world ages in both developed and developing countries. This is not all bad news. more

Increases in housing wealth increase consumption by about 5 cents per dollar in Anglo-Saxon countries and 1 cent in Europe. That need not be a worry but should be allowed for in public policy settings. more

One way to transparently ‘secure’ the financing of a PAYG, pay-related state pension is to use a “buffer stock” of GDP indexed government bonds. However, why might a government want a pay-related scheme? more

The OECD has produced its annual snapshot of the pension asset position of its members (and selected others). Nearly all have more than in 2004. More pension assets seem, without explanation, to be better than fewer. more

A member of the UK’s Pensions Commission summarises the reasons for its recommendations. They fall short of justification for a complex, long term replacement for an already complex system that doesn’t work. more

The tax advantages conferred in the US on house loans and retirement saving vehicles tend to favour the latter. Reducing debt should therefore take second place but a third of eligible home-owners seem irrational. Or are they? more

Governments that want citizens’ future pensions to depend, even in part, on market returns need to understand the risks they are taking on. Some Italian evidence may not comfort them. more

Recent pension reforms in the EU25 look as though they will worsen current levels of pensioner poverty. Fiscal considerations seem to have dominated reform – social issues have taken a back seat. more

The Dutch Tier 2 arrangements are analysed and recent financial trends observed. Industry-wide schemes are reducing benefits and employer-linked schemes are moving to DC. more

The UK’s 1986 reforms that allowed ‘Personal Pension Plans’ to replace part of the state’s Tier 2 seem not to affected other saving. Retirement and other savings seem unrelated. Perhaps. more

So far, older workers in the US have had lower 'displacement rates' than younger. But, as displacement seems related to job tenure rather than age, older workers could be more vulnerable in the future. more

There is no single answer to pensions reform - what really matters is effective government. This 'must read' suggests the best policy is what "accords best with the political economy of effective reform". more

The Netherlands is starting a huge data gathering exercise to measure all current and expected pension sources by individuals. While that may be valuable information, it’s not easy to see why Dutch policymakers should do it. more

In 2005, Australia improved tax incentives for the compulsory Tier 2. It will increase contributions and cost taxpayers more. But why? more

Australia has run persistent current account deficits for more than two decades. Without a compulsory Tier 2 savings scheme, they would have been higher. But then ….? more

After 8-14 years of a comprehensive, compulsory Tier 2, it’s unclear whether Australia’s superannuation system is generating “satisfactory levels of private saving”. more

Unemployment, or early retirement, close to pension age seems not to affect retirement incomes in Sweden. A future emphasis on defined contribution may change that, but may not. more

The politics of saving are often more prominent than the data. Information from New Zealand sheds needed light on the influence of housing on saving behaviour. more

Do tax breaks for US 401(k) schemes increase household wealth? This complex question has a surprising answer – possibly. But by a whole lot less than might be expected and perhaps not at all. more

The European old tend to be income poor but asset rich. Here is a new view, allowing for housing. Whichever way you look at it, the old seem to want to keep their homes. more

Intergenerational accounts seem to show that things must change for Polish pensions. What the Poles have done so far seems not very useful more

Policymakers worry that citizens do not behave rationally when deciding how much to save for retirement. Perhaps policymakers need not be so concerned.
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A new 75-page publication that provides "a concise outline of the historical development of Finnish social security" is so concise that its usefulness is limited. more

What, precisely, does it mean to "privatise" a public pension system? Don Fullerton and Michael Geruso explain that there are many definitions, which makes for "an increasingly muddled debate" more

From 2000, Swedes could choose where to invest 2.5% of their earnings from amongst 625 funds. We can't be sure why they have that choice and many Swedes seem not to care more

Deciding to have a pension in a poor country is one thing; delivering it is another. Nepal started a very modest universal pension in 1995-96. Despite its universality, actual coverage is only about 77% but that varies somewhat by regions. more

Protecting US Social Security incomes against inflation can be done in several possible ways. Understanding the bases reveals the difficulties so leaving things as they stand seems the preferred option. That doesn’t make it the best option. more

Past Italian evidence had apparently failed to connect respondents’ ages with reports of the impact of financial incentives on retirement decisions. Past studies were apparently flawed – older Italians seemingly behave in expected ways. more

The World Bank reviews the Latin American experience of compulsory Tier 2 retirement saving schemes. As a principal proponent of the now “five pillar” pensions solution, including compulsion, it seems a pity the World Bank can’t find more encouraging evidence. more

The proportions of older people who continue working beyond the State Pension Age are growing in many developed countries. Often, it’s not about the money. US data also indicate that work improves overall well-being. That’s good for everyone, including the economy. more

Commentators in New Zealand worry about the amount of housing in household balance sheets. Data from a new longitudinal study suggests that policymakers need not be so concerned. more

Changes in pensions tend to be incremental in the developed countries. France shows how governments avoid political repercussions by making changes slowly – perhaps not fast enough though. It’s “protest avoidance” rather than “blame avoidance”.
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The Irish government is looking at most aspects of state and private pensions. This 252 page strategy paper poses many questions and offers some indication of what’s in store for Irish pensioners, savers and employers. Probably more of the same. more

Unless governments know whether citizens are saving ‘enough’, they shouldn’t really be debating how to fix the ‘problem’ of supposed undersaving. Rising retiree health care costs seems to be the major issue in the US. more

Before state pension systems, the income or material support that the old required came from the local community, the family or from the retired themselves. Otherwise they kept working or starved. There were some positive aspects to this ‘local’ regime; but then again ….. more

Annuities can help retirees to avoid unintended bequests. In the US, more annuity wealth as a proportion of all wealth seemingly means less discretionary spending. It’s probably too soon to tell whether the growth of DC schemes will change that.

Regulators seemed to misstep in supervising financial institutions involved in the US sub-prime mortgage debacle. Should pension funds be included in general supervisory regulation or should specialist supervisors look after them? The answer isn’t simple. more

The received wisdom is that a gradual retirement is better for you than a sudden one. Happiness studies in the US don’t support that. What seems to matter is whether retirement is elected or forced, for whatever reason. more

Australia is one of only two developed countries with both income and asset tests that reduce the Tier 1 pension (the US is the other). These constrain pensioners’ decisions to trade-down the family home after retirement. Market distortions follow. more

There is lots of money in pre-funded pension arrangements of all kinds. The OECD says the 2006 total was USD25.2 trillion. Sovereign funds add another USD4.1 trillion. more

“Retirement” means different things to different people. Sickness may be the real reason for stopping work. Different countries have different experiences on disability, driven largely by financial incentives - Europeans seem, in this context, to work more than Americans. more

Societies will change as a result of ageing and not just because of their changing financial status. This fourth look at a recent UN publication suggests that countries prepare their personal support, social and political institutions for significant shifts. more

Countries wanting to improve workforce participation rates of older citizens might learn from Japan. Financial incentives, linking prospective employees with employers and increasing the proportion of self-employed seem to matter. Cultural issues also seem important. more

Encouraging older workers to delay ‘retirement’ by changing jobs represents a realistic answer to the costs of ageing populations at both a macro and a household level. But what kinds of jobs might be available? Will older workers be happy to change? Apparently. more

Comparing income and wealth in retirement between the US and six other rich countries identifies some issues that the US needs to deal with. A new international data source (the LWS) allows an initial look at a seven country comparison. more

It’s natural that government agencies find support for their government’s own retirement income strategies. Here’s one from Australia that suggests the compulsory Tier 2 savings scheme seems to be working. But all of the costs of compulsion need to be counted first. more

If you compel citizens to save for retirement then you might expect that everyone will be saving for retirement. Well, no; not once the data from 17 South American countries are analysed. Partly successful ‘compulsory’ regimes might actually do more harm than good.
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Workplace saving schemes are often creditors when the employer disappears. Should amounts owed to a scheme get priority over other creditors? The OECD thinks they should if the contributions were due but unpaid. Unfunded Defined Benefit commitments seem different.
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Another look at the UK’s proposed reforms – this time from the perspective of the impact on saving decisions today of tomorrow’s income-tested state benefits. The verdict? Complex and not well thought through. The likely outcome? Confusion and sub-optimal saving decisions (to either save or not). more

Canadian research confirms work in other countries about the “gendering of assets”. Women tend to have less income, shorter working lives in less well-paid jobs and therefore have less wealth in retirement than men. They also live longer and that potentially compounds the issue. more

The United Nations marks the publication of its 60th World Economic and Social Survey by looking at the implications of ageing for social and economic development around the world. We look at one chapter. 80% of the world’s elderly lack formal health, disability and income protection – that’s 342 million people. It could be 1.2 billion by 2050. more

Efficient annuity markets should be part of any well-developed financial market. Annuities allow the old to reliably run down their retirement savings but they are surprisingly unpopular. Only the state can provide the good data essential in this area. more

Baby boomers say they want “phased retirement” – a gradual reduction of work hours in the transition to full retirement. There are some structural issues to address but history has shown that baby boomers tend to get what they want. It might suit employers too. more

Why do workers give up the possibility of being paid to save for retirement? It seems irrational not to receive the employer’s subsidy and the usually significant tax breaks given to retirement saving. Evidence from the US and the UK gives some insights. more

The radical extensions to KiwiSaver by the New Zealand government’s 2007 Budget on the eve of its 1 July 2007 start date have raised the issue of whether governments really can change behaviour to increase either total individual or national saving. This carefully worded officials’ commentary implies not, or not much. more

When government’s procrastinate on difficult decisions, the uncertainty costs actors because it affects consumption, saving and investment decisions. It’s possible to estimate the impact of indecision with respect to the state’s involvement in pensions. It reduces welfare. more

A report gives a comprehensive description of the five Nordic countries’ social protection arrangements of all kinds. Chapter 7 (separately downloadable) analyses the age pensions and their derivatives, disability and survivor benefits. For Nordic taxpayers, they are not inexpensive. more

A “National Retirement Risk Index” (NRRI) measures the financial readiness of US citizens for retirement. The ‘at risk’ population, according to the NRRI, grew from 31% to 43% between 1983 and 2004 and is now 44%. Should US policymakers be worried about this? more

For the last 20 years, New Zealand has had a two-pillar retirement income system – an elegant, universal, PAYG state pension plus voluntary saving. There have been no tax incentives or compulsion for the second pillar of private provision. So, how have New Zealanders responded? Apparently, mostly quite rationally. So what’s the problem? more

If a country wanted to change the way it ran pensions, or other policies that affect the retirement of its citizens, it would be advised to test changes against the OECD’s Guiding Principles for Regulatory Quality and Performance. Doing that before, rather than after the change would also be good. more

House prices and debt have increased rapidly in many countries, alarmingly so to some. This matters to households where the home represents usually the most significant asset, debt and saving project. Should we (and the framers of public policy) be worried? Possibly not. more

World-wide, the distribution of wealth is more heavily concentrated than income. A “purchasing power parity” approach would reduce differences but perhaps official exchange rates better reflect personal and capital mobility. There are significant issues with data. more

Employers seem to expect baby boomers to want to work longer to make up for an apparent lack of financial preparedness in retirement saving. Greater uncertainty in expected outcomes from saving plans creates risks for both employers and employees. more

‘Poverty’ in richer countries is usually a relative concept and there are three main ways of measuring it – by income, by consumption and directly, by living standards. On the first two measures, the position of Canadian older people has improved markedly over the last 35 years. more

The things that seem to be linked to increased saving include higher output growth, “fiscal consolidation” and better terms of trade. Private credit increases and ageing populations tend to reduce saving. Increased credit may mean firms invest more while a higher cost of capital seems associated with lower investment. more

Germany provided the model for many, mainly European countries’ pension arrangements. The ageing population and falling birth rates have undermined that model. Substantial changes between 1992 and 2004 will probably continue. more

The UK proposes adding a third auto-enrolment, DC layer to the existing two-tiered state pensions. Employees can opt out; employers must subsidise member contributions. But should the government be requiring this kind of thing? Probably not - at least, not without more evidence. more

Throughout the developed world, the greatest share of retirees’ owned assets (outside pensions) comprises residential real estate. In the US, they could annuitise some of that but overwhelmingly, when they ‘equity release’ they choose a line of credit approach. more

Here is an alternative view on the possible effect that ageing populations might have on global asset prices. Demography matters to this view and so the life-cycle model could see profound effects that may be amplified by moves to more pre-funding as “older” countries reduce PAYG benefits. more

The spread of DC 401(k) retirement saving schemes in the US is often attributed, in part, to increased labour mobility. Apparently not – the more likely explanation is that the increase in 401(k) coverage was the cause rather than the effect. more

Strongly negative household ‘saving’ might tell us something about the behaviour of New Zealanders but not whether they are saving for retirement, let alone saving enough. A ‘stocks’ measure of wealth is much more useful than the ‘flows’ of income and spending. more

Saving plans designed to reflect the principles of behavioural economic principles will ‘improve’ outcomes – raise joining and saving rates and increase benefits. However employers and taxpayers might wonder whether these ‘improvements’ are all good. more

Japan’s reaction to demographic change is interesting because many countries will soon face the same challenges that Japan faces now. Incremental withdrawal of the state seems more likely than needed transformation. more

PAYGO pensions are seemingly partly responsible for falling birth rates as adults no longer need children to look after them in retirement. The solution? Give citizens a choice between the status quo pension and one based on the contributions of the children (less an amount to fund the others’ pensions). more

New Zealand’s KiwiSaver is the world’s first national, auto-enrolment, retirement savings scheme (starting 2007). The UK also proposes such a scheme – similar but different. Which is likely to be more successful? Does either country need one at all? more

There are many ways that policymakers can influence behaviour. Ageing populations mean they should be looking at different levers to manage risks. Whether they should do anything beyond looking needs more work. more

Europe’s pension crisis is a demographic one and there is a ‘remedy’: force those responsible for the crisis (those without children) to pre-fund their own pensions while continuing to pay taxes to support current pensioners.
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Previous research has tended to understate the effect of defined benefit pension wealth (state and private) on other wealth. This US study suggests a way of correcting biases. Whether we need to worry is another issue. more

The financial markets of countries seem to reflect, in aggregate, the life cycle needs of populations. The countries are individuals writ large. A 72-country analysis evidences the expected. more

Annuities have a potentially important role to play in a retiree’s investment portfolio. US evidence suggests that the retiree should choose when to annuitise. Taxpayers may not concur. more

With investment choice in Singapore’s Central Provident Fund, there is now interest in how members behave. Not as well as they should be, apparently. Time for the government to do something about that. more

The Independent Evaluation Group - World Bank looks at two decades of its involvement in pension reform. The IEG's report criticises the Bank for paying scant attention to noncontributory options for pension reform. more

US workers seem to be irrational. About a third give up the extra pay that comprises retirement saving subsidies from their employers. About half of those potential contributions are “lost”. What to do? more

Reductions in European state pensions in the 1990s seem not to have increased saving rates. There are several possible explanations – irrational citizens need not be one of them. more

The World Bank’s Averting the Old Age Crisis notes that "myths abound in discussions of old age security". Ten such myths are demolished in a 1999 ‘must read’. more

Population ageing need not equal public pension crisis. In a growing economy, workers can enjoy higher net real wages and support increasing numbers of pensioners. How come? more

There is no substitute for looking at stocks of wealth (rather than flows of “saving”) to assess the adequacy of retirement saving. This US study re-proves that eloquently. more

Tax incentives for private provision are as much part of public pension costs as the amounts directly paid to the retired. Counting the costs of incentives might raise awkward questions. more

Chile and other Latin American countries give us lessons about what (and what not) to do; what (and what not) to expect. Intricately detailed regulation is inevitable – “success” isn’t obvious. more

Norway apparently needs pension reforms and this paper looks at some of the possibilities. There are other issues that might be added to the agenda. more

The living arrangements of the elderly in Portugal seem to be changing rapidly since 1994. That has both social and welfare consequences. more

Whether more savings means economic growth seems related to the type of country. Greater savings might matter for poor but not for rich countries. more

The UK’s pension arrangements are complex and seem not to be working. The latest proposals? Let’s make them more complicated more

Conspiracy theories apparently explain the push to privatisation. The actual reasons are probably more mundane
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In Canada, the impact of the way in which taxes and benefits are indexed is larger than delaying the entitlement age to 70. Perhaps the benefit design needs fixing. more

Five different data sources show that private pension coverage in the US is about 50% of workers and has been that way for at least 15 years more

The World Bank’s 1994 book, "Averting the Crisis" started the pensions debate in many countries and has provided a template for change. An e-version is now available to download more

Since 2001 every Mexico City resident over 70 has received free medical care and a monthly pension. The governor responsible for this programme ran for President and promised to extend the programme to all Mexicans. more

The World Bank's pension specialists have re-visited the Bank's 1994 "three pillar" model and come up with five pillars. There are some obvious and curious gaps more

Private medical insurance for the US retired costs a lot. Without employer-paid cover, retirees don’t have many choices. If they save for the post-retirement costs, the amount looks discouraging. Cutting cover or relying on the state seem the only other options. more

The macro-economic numbers appear to show New Zealand’s household saving has plummeted since 2000. Are the numbers wrong or are households getting poorer at an alarming rate? Statistics may not give the full picture – missing information doesn’t help. more

Longitudinal studies track the behaviour of individuals over periods of time. They show how people respond to change and how they might integrate private behaviour with public policy. It’s comforting to see that US citizens seem to behave as the supporters of the “rational expectations” hypothesis might have guessed. more

Universal pensions are a good idea – for a country. But what about for the world? Because we live in a world where business is “globalised”, what’s wrong with adopting the same approach for a “worldwide old-age pension”? Quite a lot actually, especially if someone else has to pay for it.
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Governments, insurance companies and Defined Benefit private plans all provide annuities that depend on one or, sometimes, two lives. US providers are probably underestimating the mortality risk. And then there is the investment risk. more

In a retirement saving scheme, who should bear the inflation, investment and ultimate mortality risks? In a pure Defined Contribution environment, it’s the saver. In the Netherlands, employers, taxpayers and other savers pitch in as well through “hybrid pension plans”. The, perhaps, unintended consequence of regulation? more

US workers don’t see the changes that are coming; are failing to act constructively; expect benefits they don’t have; won’t act on investment advice; don’t have much financial savings outside DB plans and don’t understand Social Security. Nothing too surprising in any of that. more

The Danish pension system combines a modest universal, Tier 1 pension and “near universal” Tier 3 Defined Contribution deferred and immediate annuities. Tier 3 is distinctively Danish and apparently enjoys wide, necessary support. But it is complex. more

How do US citizens respond to signals embedded in the system of financial support for nursing home care? Quite rationally actually, though some might call it a “reflection of the moral hazard due to the existence of social insurance.” more

The shape of state-provided pensions affects people’s behaviour at the work/retirement transition. Often the law of unintended consequences applies. US evidence indicates the truth of both these influences as the rules have changed. more

If more older people worked, countries might produce more, improve the economies’ capacity and reduce the costs of ageing populations. Older people and other taxpayers might be happier as a result. Australia is starting to wonder about participation rates at all ages. more

Changes to the way retirement incomes are financed should be based on good evidence that is subjected to robust investigation over time. New Zealand missed those steps with its new KiwiSaver scheme, justifying its existence on seemingly dubious economic analysis. more

Taxpayers ought to worry about the future cost of the Defined Benefit pension promises made to civil servants, but not for reasons given in this report on pensions promises of the German Federal State of Hesse. more

If the UK’s system of Personal Accounts starts as planned in 2012, some people shouldn’t join because, strangely, they will be worse off by saving. Here is a suggested solution to that problem. more

The OECD reviews a decade of China’s pension reforms. The authors report no progress: the goal of expanded coverage remains as elusive as ever. It seems that, even in China, citizens can’t be made to join the ‘compulsory’ system. more

People (and some nations) save for retirement because citizens stop working on account of age. Lots of money will be needed for baby boomers’ retirements (too much, say some). But what if we abolished retirement? A lot of people want to work until they drop. Why not let public policy encourage that? more

Diversification, argue investment professionals, reduces risk. That is the received wisdom - here is some proof. Looking back over nearly 80 years, savers in eight countries would have been better off investing 100% in other countries’ investments, not their own. more

New Zealand’s taxpayers will be spending a lot of public money on new retirement income saving initiatives after nearly 20 years of spending none. Was this decision based on sound analysis of data on New Zealanders' savings behaviour? Is this policy shift likely to meet any of the stated objectives? Probably not. more

China reformed its pension system to pre-funded individual accounts in 1998, but faces a problem of ‘empty’ accounts because the funds have been used to finance social expenditure of local governments. A high-level international research team recommended in 2005 that the country transform these ‘empty’ accounts into ‘notional’ accounts. more

Defined Contribution plans often leave the investment decision (and the investment risk) to members. Unfortunately, members often don’t know what they are doing. Designing investment options carefully can help. more

Some suggest that demographic change is exerting a positive impact on saving rates in developed countries. Apparently not – the effect seems now negative and inexorable (but not necessarily disruptive). There are other explanations for the ‘savings glut’. more

Annuity markets – particularly voluntary annuity markets – tend to be small, expensive and under-developed. As a result, they seem to play a smaller than ideal role in retirees’ portfolios. Time for public policy to take a lead? Probably. more

The UN suggests that the economic consequences of ageing are far from difficult. Most developed countries will probably be OK on current growth trajectories. Immigration probably won’t help; improving workforce participation and productivity will. Increased savings might raise risks. more

US analysis shows that variable annuities seem better suited to retirement investment needs than fixed annuities. And gradual annuitisation from retirement until age 80 seems better than 100% annuitisation at retirement. That’s what the model says – real life might be more difficult. more

Governments that get involved in guaranteeing retirement benefits of failed private schemes or the bankruptcy of sponsoring employers need to take care. Political, rather than market-based motives raise gaming opportunities. more

Countries angst over their citizens’ saving behaviour (typically awful). Public policy decisions seem to hinge on inadequate data. Aggregate saving measures in the US seem particularly unhelpful. Most of the downward trend seems attributable to changes in the saving rates of those over 65. Why might we be concerned about them? more

Employer-sponsors of Defined Benefit plans (and their advisers) worry about the economic risks of improved mortality. Better data and improved projection techniques might not comfort them. A better understanding of the issues would help policymakers. more

Spain introduced tax incentives for retirement saving in 1988. Contemporary data show how they affected consumption behaviour. New saving is at best less than a quarter of money contributed. There are some differences in the impact on consumption at different ages. The oldest show most signs of rearranging existing savings. more

Private medical insurance is a big deal in the US. Being employed at older ages may be as much about access to this cover as about pay. Continued access during early retirement to private insurance may be declining, adding worries to those raised by declines in public and private retirement incomes. more

Wealth at and in retirement is the only thing that really matters to a household’s economic welfare in retirement. That can be measured only at the household level. So, what can we tell from aggregate, so-called “household saving” numbers? Not a lot. In fact they tend to distract rather than illuminate. more

The “National Retirement Risk Index” (NRRI) measures the financial readiness of US citizens for retirement. This third look at the NRRI data seems to show that the future retirement income position of the bottom third of households worsened over the period 1983-2004 and might worsen again. more

The EU’s future pension numbers are compared and analysed. Risks to the outcomes are modelled. Pension costs will increase but not to the same extent that the increasing numbers of pensioners might have suggested. Whether EU countries can hold the line on costs is another, political, issue. more

Formally defining “actuarial fairness” and “actuarial neutrality” in the context of state pension systems may be useful (to understand how individuals may be affected) but probably doesn’t help much. Both concepts derive from design elements that perhaps should not define entitlements to state benefits. more

The world of Tier 2 retirement saving schemes is changing as this two-country comparison illustrates. Employers are reacting naturally and possibly in their best long-term interests. Sometimes commercial and community interests diverge. more

In Australia’s compulsory Tier 2 environment with an income/asset tested age Tier 1 pension, what is the role of Tier 3? Overall, apart from saving through housing, not very much. Financial assets, including superannuation, increased over a six year period by the same amount as debt. more

Many New Zealand households have family trusts. These usually have a tax planning or asset-protection rationale. Given that the outcome will usually mean that the government pays more or receives less – and that individuals own and earn less – we need to know more about them. more

Australia’s retirement income environment is complex during both the accumulation and retirement phases. Complexity necessarily accompanies compulsory private saving and there are gaps that seemingly need fixing. Whether it is ‘successful’ has a number of possible answers. more

Governments are under pressure to cut ageing costs must hope that the labour market offers older workers work to offset reductions in state programmes. A US experiment suggests that older applicants find it more difficult than younger to get a job offer. more

Turkey offers lessons in how not to reform pensions, how not to face up fully to necessary change and how long it might take to look like fixing things. Recent changes are not enough and not just from the viewpoint of the cost of unaffordable past promises. more

So does pre-funding government pension systems increase national saving? That depends on who’s in charge of the money and how it’s run. The case for private pre-funding to increase national saving seems lost because of the substitutionary effect. more

In the pantheon of PensionReforms’ universe, China is the big one. Its size eclipses all others - its pension problems are no smaller and are likely to worsen. Recent moves to partially ‘privatise’ pensions seem headed down the wrong track. There are other, simpler, more appropriate ways of addressing the issues. more

In 1983, the US government increased the State Pension Age by two months a year (from age 65 to 67 over 24 years), affecting employees born after 1938. Actual retirement ages seem to be affected by about one month in each two months the State Pension Age is higher. more

US baby boomers say they want to retire later. The things that flag later retirement ages include self-employment, education and earnings. DB pensions, employer-sponsored retiree health benefits and wealth point to earlier retirements. Might the 'crisis' fix itself? more

What to do about public policy on pensions if formal property rights don’t really exist? The usual prescriptions shouldn’t apply so building on traditional ways of looking after the old is at least part of the answer. Fixing the legal system should also be part of the solution and not just for retirement incomes. more

After retirement, asset holdings of the retired change in largely expected ways. It’s nice to know that and also that there is room for more, better information, given the future size of this part of our populations. more

An analysis in 2000 of 30 years’ data from 150 countries shows what seems to really matter if improving savings is a national objective. Growth seems important but private reactions are slow to appear. Faith in the good sense of citizens also probably matters. more

“Notional Defined Contribution” arrangements are replacing and supplementing existing state schemes – here are some of NDC’s strengths and weaknesses. However, NDC schemes do not clearly identify why the state is in the pensions business. more

Australians have taken their first detailed look at household wealth in 90 years. Apparently they are doing quite well but much of their wealth is illiquid (housing etc). We need to know more about the ways their assets change over time. more

Any positive impact on gross national saving that might be attributable specifically to increased pension saving is low. Reforming countries do not seem to have attained higher saving rates than others. Perhaps we should stop worrying. more

This 20 year review of Chile’s pension arrangements identifies its achievements and quantifies its contribution to key economic indicators. However, looking at the past doesn’t mean it should be the future. more

The UK government’s own employees would cost a lot more than their salaries if pension promises were properly accounted for. A look at the cost of those promises produces some alarming numbers. more

US social insurance is, in substance, both economically sensible and socially and politically acceptable. That’s why it has resisted recent change but that shouldn’t make it unchangeable. more

The US age discrimination laws (ADEA) seem to be having perverse effects – increasingly protecting, at significant cost, the jobs of older, white, male middle managers. The ‘Law of Unintended Consequences’ again. more

The SSA in the US has released its latest analysis of the over-65s’ incomes. Social Security provides at least half their income – the median total pre-tax, pre-Medicare income is $US20,481. more

Martin Feldstein offers a sweeping review of current US ‘social insurance’ and ‘welfare’ programmes and suggests a political and economic basis for reform. Definitional issues limit the possibilities. more

The housing habits of US ‘early’ baby boomers and current younger retirees are analysed and compared. There are differences but the similarities are more striking. No particular need to worry about either. more

If public pensions should, in part, prevent poverty amongst the elderly, a major review of the EU25 countries shows a fairly dismal picture. This, despite the huge cost and hugely complex public pension arrangements. more

Privatising Tier 1 in Chile carried large, long-tail transition costs as this 1998 paper amply illustrates. That’s not the only problem with a compulsory Tier 2. The advantages are less obvious. more

A largish sample of English pre-retirees seems to have saving for retirement income under control. It’s a pity that recent major reports, intended to inform the UK’s debate on pensions reform, didn’t seem to notice that. more

This 1999 paper looks at some of the shortcomings of recent pension reforms, particularly in less developed countries. Increased complexity seems the inevitable next step. more

The Jonahs tell you that if pensions don’t get you, age-related health care costs surely will. Information from New Zealand raises questions about the health component of this received wisdom. more

Bolivia is the only country in the Americas that provides its citizens with a universal age pension. Antigua and Barbuda will be the second if a new government keeps its promise. more

Annuities matter for ageing baby boomers who should want to run down their retirement saving assets in an orderly way. They should also matter for governments. This article looks at the UK annuities market. more

Behavioural economics tells us that US savers tend to be irrational with their saving and investment choices. They might be but the hugely complex rules don’t help. more

In a seminal 1992 paper, Alicia Munnell argued for the removal of tax breaks for retirement saving in the US. The logic still stands and things have got worse since. more

The UK’s Pensions Policy Institute suggests that the UK government has not looked at all the options for pensions reform. If that’s so, any changes probably won’t last. more

Some relatively positive news from the US for citizens' contemplating an increasing pension age. It’s not all doom and gloom. more

Not many countries regularly count the cost of tax incentives for retirement saving. The OECD sheds some light on this complex task but doesn't get to some obvious questions more

US evidence shows that a shift from defined benefit to defined contribution plans increases the variance in asset holdings. There are potential lessons for those who propose reducing risk-sharing in traditional social security programmes more

US citizens in their peak saving period seem, perhaps, to have their retirement saving project at least partly under control. However, asking people what they think doesn't always give you what you need to know
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The OECD published, as a supplement to its biannual publication "Financial Market Trends", a 111-page report that examines the governance of private pension funds and abuse of tax deferrals. more

The Trustees of the US Social Security pension system have issued their annual Report on its financial outlook, which is little changed from last year.
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Bonn's IWG proposes a PAYG citizen's pension to replace Germany's complex, unsustainable, earnings–related scheme. A shaft of light in a murky debate more

New Zealand's Savings Product Working Group thinks the government should force NZrs to decide whether to save for retirement – the trouble is with the lack of evidence more