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Since 1 May 2009
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
The IMF looks at the fiscal implications of global demographic pressures. Unsustainable Euro-debt was already (2007) a problem, worsened by ‘spill-overs’ from other countries’ demographic adjustments. GDP will take a hit; higher participation rates would help. more
The IMF looked (in 2006) at some big picture implications of the world’s ageing populations. The conclusions survive an initial sense test but 90 year projections must come with significant qualifications. more
The real value of Russia’s public pension will fall over the next 20 years. Lifting the State Pension Age, means-testing and improving the finances of the Defined Benefit, Tier 2 scheme and budget tightening seem the answers, along with improving confidence in private markets. more
Defined Benefit, Tier 3 occupational schemes are an internationally endangered species. The OECD looks at their regulation and wonders whether rules designed to protect members are a disincentive to employers. Perhaps a ‘risk-based’ approach to regulation might be better. more
In Japan, there was no ‘golden past’ where the elderly were properly looked after by their families. “Care-giving hell” and “social hospitalisation” seems a better summary and may still be a fair summary. Reforms in 2000 seem only a step in the right direction. more
A 2007 OECD report explains the regulatory risks associated with ‘final salary’, Defined Benefit, occupational pension schemes. In summary, accounting standard-based measures of cost do not necessarily meet regulatory needs. Regulators’ rules can have undesirable consequences. more
State employers’ schemes dominate China’s occupational pension arrangements even though private employers have 75% of employees. Smaller employers are reluctant so perhaps existing schemes could be opened up. There are probably other barriers to change. more
Annuities should help retirees to protect themselves against living too long. It now seems they can also provide protection against the costs of unexpected health shocks. The increased emphasis in the US on Defined Contribution schemes raises an issue in this regard. more
In Australia, ‘health and wellness’ is now the largest business sector. Population ageing will create large business possibilities but there will be pressures on the income side. Who will pay for those extra services and how? more
Latin America is rapidly aging with fewer children and more older people. At worst, 82% of urban dwellers in Guatemala have no retirement income; in other countries they fare a little better. The numbers are even lower for rural populations. That looks set to worsen. more
House prices rose a lot in the US in the period to 2007. Householders responded and spent some of the gains by increasing debt. The subsequent downturn in values has damaged household balance sheets, a concern for those in or nearing retirement. more
In a look at successful anti-poverty programmes across eight poorer countries, old-age pensions feature in four of them (India, Lesotho, Namibia and South Africa). Resolving the politics is a necessary first step: the “institutional fit” is essential. 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
The IMF looks at the fiscal implications of global demographic pressures. Unsustainable Euro-debt was already (2007) a problem, worsened by ‘spill-overs’ from other countries’ demographic adjustments. GDP will take a hit; higher participation rates would help. more
The IMF looked (in 2006) at some big picture implications of the world’s ageing populations. The conclusions survive an initial sense test but 90 year projections must come with significant qualifications. more
The real value of Russia’s public pension will fall over the next 20 years. Lifting the State Pension Age, means-testing and improving the finances of the Defined Benefit, Tier 2 scheme and budget tightening seem the answers, along with improving confidence in private markets. more
Defined Benefit, Tier 3 occupational schemes are an internationally endangered species. The OECD looks at their regulation and wonders whether rules designed to protect members are a disincentive to employers. Perhaps a ‘risk-based’ approach to regulation might be better. more
In Japan, there was no ‘golden past’ where the elderly were properly looked after by their families. “Care-giving hell” and “social hospitalisation” seems a better summary and may still be a fair summary. Reforms in 2000 seem only a step in the right direction. more
A 2007 OECD report explains the regulatory risks associated with ‘final salary’, Defined Benefit, occupational pension schemes. In summary, accounting standard-based measures of cost do not necessarily meet regulatory needs. Regulators’ rules can have undesirable consequences. more
State employers’ schemes dominate China’s occupational pension arrangements even though private employers have 75% of employees. Smaller employers are reluctant so perhaps existing schemes could be opened up. There are probably other barriers to change. more
Annuities should help retirees to protect themselves against living too long. It now seems they can also provide protection against the costs of unexpected health shocks. The increased emphasis in the US on Defined Contribution schemes raises an issue in this regard. more
In Australia, ‘health and wellness’ is now the largest business sector. Population ageing will create large business possibilities but there will be pressures on the income side. Who will pay for those extra services and how? more
Latin America is rapidly aging with fewer children and more older people. At worst, 82% of urban dwellers in Guatemala have no retirement income; in other countries they fare a little better. The numbers are even lower for rural populations. That looks set to worsen. more
House prices rose a lot in the US in the period to 2007. Householders responded and spent some of the gains by increasing debt. The subsequent downturn in values has damaged household balance sheets, a concern for those in or nearing retirement. more
In a look at successful anti-poverty programmes across eight poorer countries, old-age pensions feature in four of them (India, Lesotho, Namibia and South Africa). Resolving the politics is a necessary first step: the “institutional fit” is essential. 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
Pre-funded retirement saving schemes need investments for the accumulated savings. The IMF looked (in 2003) at capital flows based on demographic trends. In the next 20 years, less developed regions will probably finance retirees’ incomes in rich countries. more
Across the US, labour force participation rates of men in the years leading to age 65 vary a great deal (from 40% to 85%). There seem to be several reasons for this, none of them surprising: the local economy, employers and the workers themselves. more
An old data set provides a natural experiment showing how pensions improved mortality for Union Army veterans in the US. Two different pensions show that more money meant longer life-expectancy. There are lessons for today’s developing countries. more
Marriage status in the US (married, single, divorced, re-married) seems to have a significant effect on wealth, both positive and negative. The diverse history of retirees’ marital ‘events’ and their timing seems to explain some of the statistics about retirement wealth, but not all. more
Senegal’s acute poverty levels amongst the elderly can be most directly addressed by a new Tier 1 pension. That will also have a significant impact on general poverty levels. The lessons in Senegal have general application in other sub-Saharan countries. more
A major World Bank report describes the demographic challenges faced by Brazil over the next 40 years. In some ways, they are more demanding than those faced by developed countries. A compulsory, pre-funded Tier 2 scheme is not discussed. more
Institutions that make private Defined Benefit promises (like employers and annuity providers) must prove they can meet their obligations. The EU’s rules that run this process for insurance companies (‘Solvency II’) look set to apply to occupational schemes. more
Governments can reliably protect the old against poverty only with a Universal Pension. So, what were the arguments for establishing them in Canada, Mauritius and Norway? Reducing poverty was one but an aversion to means tests and respect for human dignity seemed more important. more
Pension promises by governments should be “actuarially neutral across generations”. To work that out requires the calculation of ‘implicit pension debt’. If public pensions were contractual commitments met from savers’ own money, there might be some point to this. more
In 1983, the US decided to increase the State Pension Age. Workers have reacted strongly. The retirement age is rising by 50% of the increase in State Pension Age. That may have created a discontinuity in behaviour so that specific account needs to be taken of the change. more
New Zealand’s KiwiSaver is a natural experiment. A world-first, auto-enrolment, opt-out national scheme started in 2007. How much of the members’ contributions are ‘extra’ savings? About a third in the short-run but perhaps at the expense of reduced national saving in the long-run. more
New Zealand reduced the State Pension Age from 65 to 60 in 1977. It gradually returned to 65 between 1992 and 2000. So, what happened to labour force participation rates of the young old? Predictably, they fell in the 1980s and rose in the 1990s. more
Unexpected increases in US housing wealth to 2002 seem to have only a small influence on the choice of retirement dates. The financial numbers make some sense though we don’t really understand the connections. Subsequent falls in prices are to be analysed. 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
Pre-funded retirement saving schemes need investments for the accumulated savings. The IMF looked (in 2003) at capital flows based on demographic trends. In the next 20 years, less developed regions will probably finance retirees’ incomes in rich countries. more
Across the US, labour force participation rates of men in the years leading to age 65 vary a great deal (from 40% to 85%). There seem to be several reasons for this, none of them surprising: the local economy, employers and the workers themselves. more
An old data set provides a natural experiment showing how pensions improved mortality for Union Army veterans in the US. Two different pensions show that more money meant longer life-expectancy. There are lessons for today’s developing countries. more
Marriage status in the US (married, single, divorced, re-married) seems to have a significant effect on wealth, both positive and negative. The diverse history of retirees’ marital ‘events’ and their timing seems to explain some of the statistics about retirement wealth, but not all. more
Senegal’s acute poverty levels amongst the elderly can be most directly addressed by a new Tier 1 pension. That will also have a significant impact on general poverty levels. The lessons in Senegal have general application in other sub-Saharan countries. more
A major World Bank report describes the demographic challenges faced by Brazil over the next 40 years. In some ways, they are more demanding than those faced by developed countries. A compulsory, pre-funded Tier 2 scheme is not discussed. more
Institutions that make private Defined Benefit promises (like employers and annuity providers) must prove they can meet their obligations. The EU’s rules that run this process for insurance companies (‘Solvency II’) look set to apply to occupational schemes. more
Governments can reliably protect the old against poverty only with a Universal Pension. So, what were the arguments for establishing them in Canada, Mauritius and Norway? Reducing poverty was one but an aversion to means tests and respect for human dignity seemed more important. more
Pension promises by governments should be “actuarially neutral across generations”. To work that out requires the calculation of ‘implicit pension debt’. If public pensions were contractual commitments met from savers’ own money, there might be some point to this. more
In 1983, the US decided to increase the State Pension Age. Workers have reacted strongly. The retirement age is rising by 50% of the increase in State Pension Age. That may have created a discontinuity in behaviour so that specific account needs to be taken of the change. more
New Zealand’s KiwiSaver is a natural experiment. A world-first, auto-enrolment, opt-out national scheme started in 2007. How much of the members’ contributions are ‘extra’ savings? About a third in the short-run but perhaps at the expense of reduced national saving in the long-run. more
New Zealand reduced the State Pension Age from 65 to 60 in 1977. It gradually returned to 65 between 1992 and 2000. So, what happened to labour force participation rates of the young old? Predictably, they fell in the 1980s and rose in the 1990s. more
Unexpected increases in US housing wealth to 2002 seem to have only a small influence on the choice of retirement dates. The financial numbers make some sense though we don’t really understand the connections. Subsequent falls in prices are to be analysed. 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
Future Australian retirees with larger Tier 2 Defined Contribution accounts face a decumulation problem: how long will they live? Are annuities or ‘allocated pensions’ (managed incomes) likely to be better? What should advisers be saying to their customers? more
When the state dominates welfare and occupational pension provision (as in Spain), necessary reform is more painful. Without significant reform, pensions will cost 32% of output by 2050. The OLG modelling shows that deeper changes (than discussed) are indicated. more
A natural experiment in South Africa shows the effect of pensions on household spending patterns. With more money going directly to women, the spending decisions are different – better nutrition for female children and higher levels of durable goods ownership, for example. more
China’s present pensions (state and private) aren’t working so reform is needed. Why not a Universal Pension? Cost is a matter of benefit design. The pension might improve social and political security and reduce the gap between rural and urban populations. more
Poverty levels amongst pensioners in the UK are high (16%) and may reduce to 11% by 2025 on current policies. Changes proposed by the government might see that come down to 7% with a modest increase in cost. That will still be a lot of people. more
The underfunding of Defined Benefit schemes is a worry (in 2007). Might benefit insurance be helpful? There is a natural experiment in Canada but that still needs investigation. However, the answer seems to be ‘probably not’. more
Sovereign wealth funds are now quite common but have varying backgrounds and purposes. Even if justified, governance issues are significant. For pension ‘reserve funds’, some basic questions need answering first. more
Private pension schemes need to be run and regulated well; across the OECD, that largely means ‘better than they are now’. Improvements include better disclosure, governance structures, default options and monitoring. That’s just about everything. more
A US survey shows that older workers could be persuaded to work longer, mainly for higher remuneration but other also things matter. Retirees made their decisions because retirement became financially feasible; for more personal time or because of the job or their health. more
Some think that governments should show pension obligations as a contingent liability on their balance sheets. Accountants seem to like the idea and the SNA accounts for governments may look a bit different in future. The ‘why?’ question is analysed incompletely. more
Retirement saving planning tends to aim for a target at a fixed retirement age, sometimes many years away. However, real life is complex, especially in volatile times. A ‘safe savings rate’ takes a different approach; the retirement date itself is not significant. more
Germany’s ‘implicit pension debt’ is sizeable, despite recent increases in contributions. But that seems to be only one problem with unfunded public pensions; a lack of children is also an issue. A re-design and some pre-funding might fix both of these problems. Perhaps. 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
Future Australian retirees with larger Tier 2 Defined Contribution accounts face a decumulation problem: how long will they live? Are annuities or ‘allocated pensions’ (managed incomes) likely to be better? What should advisers be saying to their customers? more
When the state dominates welfare and occupational pension provision (as in Spain), necessary reform is more painful. Without significant reform, pensions will cost 32% of output by 2050. The OLG modelling shows that deeper changes (than discussed) are indicated. more
A natural experiment in South Africa shows the effect of pensions on household spending patterns. With more money going directly to women, the spending decisions are different – better nutrition for female children and higher levels of durable goods ownership, for example. more
China’s present pensions (state and private) aren’t working so reform is needed. Why not a Universal Pension? Cost is a matter of benefit design. The pension might improve social and political security and reduce the gap between rural and urban populations. more
Poverty levels amongst pensioners in the UK are high (16%) and may reduce to 11% by 2025 on current policies. Changes proposed by the government might see that come down to 7% with a modest increase in cost. That will still be a lot of people. more
The underfunding of Defined Benefit schemes is a worry (in 2007). Might benefit insurance be helpful? There is a natural experiment in Canada but that still needs investigation. However, the answer seems to be ‘probably not’. more
Sovereign wealth funds are now quite common but have varying backgrounds and purposes. Even if justified, governance issues are significant. For pension ‘reserve funds’, some basic questions need answering first. more
Private pension schemes need to be run and regulated well; across the OECD, that largely means ‘better than they are now’. Improvements include better disclosure, governance structures, default options and monitoring. That’s just about everything. more
A US survey shows that older workers could be persuaded to work longer, mainly for higher remuneration but other also things matter. Retirees made their decisions because retirement became financially feasible; for more personal time or because of the job or their health. more
Some think that governments should show pension obligations as a contingent liability on their balance sheets. Accountants seem to like the idea and the SNA accounts for governments may look a bit different in future. The ‘why?’ question is analysed incompletely. more
Retirement saving planning tends to aim for a target at a fixed retirement age, sometimes many years away. However, real life is complex, especially in volatile times. A ‘safe savings rate’ takes a different approach; the retirement date itself is not significant. more
Germany’s ‘implicit pension debt’ is sizeable, despite recent increases in contributions. But that seems to be only one problem with unfunded public pensions; a lack of children is also an issue. A re-design and some pre-funding might fix both of these problems. Perhaps. more
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