PensionReforms' summary and comments
Modern democracies (and other countries) have developed different ways of supporting the vulnerable with income and other types of support.  The amounts involved for the old are by far the largest because of the numbers of potential claimants.

Income support for the old can be public and/or private; Defined Benefit and/or Defined Contribution; lump sum and/or pension; PAYG and/or pre-funded and there are any number of ways in which these options can be put together, encouraged or enforced.  Together, they allow today's pensioners to make claims on today's economic output.

As the world became richer, particularly during the second half of the 20th century, the value of those claims rose both because the number of pensioners increased (improved mortality coupled with lower 'retirement' ages) and because the amounts promised increased in real terms.

The question many are now asking is whether what we have can continue:
"There exists a widespread conviction that pension protection, along with many other social benefits, is slowly being eroded as responsibility for insurance and the associated costs are shifted from government and employers to individual citizens and their family members."

The report asks what might have happened to question the possible continuance of past promises. Not that many countries have made really major changes to their pension arrangements.  Lifting the State Pension Age by a year or three doesn't really count as a 'major reform', given improving mortality.  In fact, the evidence from around the world (former Eastern bloc countries aside) tends to see improving living standards amongst the old.

There is probably more change happening though with Tier 3 employment-related arrangements:
"Negative indicators are, however, to be seen almost everywhere as employers freeze or terminate their defined benefit pension schemes.  Employees themselves claim to prefer defined contribution plans; although there is much evidence that they do a generally poor job of managing their pension assets and that many cannot or will not save enough to ensure an adequate income stream in the future.  Furthermore, provision for the increasing cost of health care has already begun to erode the funds available to improve pension benefits for the elderly most in need."

The report suggests that it is time for the public debate in many countries to begin as we fashion a new approach to the intergenerational support for the old (and others).  It's time we moved past alarmist statistics and started to talk about a new consensus about the roles of employees (and other citizens), employers and the state.

"Current public discussion seems to be characterized by 'the sky is falling' rhetoric, rather than proposals articulating the outlines of a new social contract. It is clear that it is not simply a matter of passing new laws. Political leadership and consensus building around how much is to be provided to older citizens and how it will be financed must advance to meet the demands of a new social contract."

There are some specific issues that the report suggests should have priority:
"I would identify three key issues that policymakers [in the US] must resolve to bring pension arrangements into line with the new realities of an ageing population:
(1) advancing the early retirement age;
(2) reforming the disability insurance branch; and
(3) facilitating, enabling, and advising individuals on how to save for their own retirement."

The report suggests that resolving the pension questions will probably be a lot easier (in the US) than the issues associated with health care.  PensionReforms agrees.

PensionReforms supports the report's call for a re-think of the way developed countries discuss and resolve pension issues but questions the author's apparent support for tax breaks and/or compulsion in the US to convince the population to "change its behaviour".  The trouble here is with the evidence - tax breaks seem not to work and neither really does compulsion.  PensionReforms' "Sort & Options" page here identifies reports discussing "Taxation" and "Compulsion".  They raise questions about both strategies.  Both tax incentives and compulsion need to face examination as part of the report's recommended public debate.

The report notes that "...50% of the retired population [is] not adequately saving for retirement and will continue to rely for almost all of their retirement income on the public social security system."  PensionReforms suggests that the evidence cited for this (an AARP survey) is contradicted by other evidence - see here for example.   But, even if it were true, PensionReforms is unsure why that 50% number necessarily needs to be changed.  Does it really matter whether the pensioner's claim on the economy is made through the public system or through a private pension arrangement?

PensionReforms agrees that simply passing new laws won't provide the necessary future framework for intergenerational stability in any new retirement income framework. Political leadership, as suggested by the report, might be the answer but PensionReforms suspects that this is too hard for one government-of-the-day to achieve on its own.  Extra-political leadership is probably needed first to define the issues, produce the numbers, raise the options and gather the needed consensus, including amongst politicians. In that, it would be helpful if the examination were an open one, rather than simply supporting a political decision already made.  (File size 396 KB)  224