PensionReforms
Veritas propter investigationem [Truth through research]

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PensionReforms keeps the front page thumbnail (and link to the abstract) of every publication reviewed. The front page is limited to about 50 listings to speed the initial load. As thumbnails come off the front page, they will be kept here in descending “publication date” order. If you “sort” or “search” abstracts, PensionReforms includes all abstracts listed on both the front page and here.

New Zealand might have productivity issues that are associated with an ageing population. There’s a distinction between the national economic burden and the fiscal costs of ageing. Changes to Tier 1 seem to have the most potential. more



Yet another look at financial knowledge amongst older Americans shows large gaps in ‘sophistication’ of the kind needed to make appropriate retirement, investment and decumulation decisions. The gaps are ‘striking’ and concerning. more



Australia’s Tier 2 (compulsory) scheme needs significant reform to reduce distortions to investment and labour markets. Better integration with the means-tested Tier 1 is needed. Tier 2 doesn’t ‘need’ higher contributions. more



In the US, stronger anti-discrimination rules may help some older employees to stay in work as the State Pension Age increases but not others in physically-demanding work. Overall, the impact seems inconclusive. more



In Ireland, executive directors’ pension arrangements are markedly more generous than those for ordinary employees. That magnifies the already-wide gap in direct pay. Overly favourable tax treatment of pensions needs further trimming. more



The UN and HelpAge International have combined to report on ageing issues and public policy challenges. Older people deserve to live “with dignity and security”. Developing countries face the largest challenges. more



The EU says that pension systems need changing to meet new economic and old demographic circumstances. The challenges are significant but can be achieved and all countries must cooperate. A ‘White Paper’ lays out the agenda. more



The Japanese sovereign wealth fund (the GPIF) partially pre-funds state pension schemes. Its governance structures and strategy are described, as well the political risks that need managing. Why Japan needs it is another question. more



A US database of 2,620 residents of ‘independent living’ and ‘assisted living’ institutions reported overall satisfaction in 2011 with the services they receive. The report looks at their concerns and how they pay for their outgoings. more



A 2008 OECD report reviewed what countries are actually doing about the decumulation phase of retirement savings. Much needs to be thought about as most seem not to have really thought about the switch from DB to DC schemes. more



The Retirement Commissioner’s three yearly review of New Zealand’s retirement income arrangements has another crop of recommendations; but nothing much happened to the 2010 suggestions. Governments tend to ignore these reports. more



As populations age, tax-funded costs associated with pensions and healthcare rise. Governments’ capacities to raise required revenues will be constrained by the changing population shape. Different countries will have different taxing capacities. more



The ‘three pillar’ concept had its roots in Swiss pension history but meant something different from the World Bank’s 1994 version. The Swiss history explains how that country’s ‘consensus’ emerged. more



The shift in the US from DB to DC retirement saving schemes means that surveys are probably not measuring retirement incomes accurately. They need to allow for lump sum drawdowns that contribute to wellbeing in retirement. more



An OLG model suggests an ‘optimal’ state pension design. It identifies “strong efficiency losses” from means-testing and some contribution-based benefits. Testing flat-rate pensions against other pensions seems OK; the most efficient system includes a “universal earnings-related pension”. more



In 1996, the qualification for the Tier 1 SSI in the US changed to require at least 40 quarters’ (10 years’) work. Males seemed to increase their work/reduce retirement rates. However, for women, there was no change to work rates but an increase in retirement rates. more



China’s regulatory system for ‘private’ pensions needs reform. The system may limit the growth of pensions. The OECD recommends reform – more expertise, better regulatory structure, agreement between authorities on roles, separate public and private pension supervision etc. more



In Denmark, it seems that automatic or passive savings arrangements are more effective in raising retirement savings than active. Tax breaks seem relatively ineffective; mandatory and ‘nudge’ schemes seem much more effective. more



German ‘participating payout life annuities’ (PLAs) seem to protect both annuitants and providers in times of volatile investment returns. How do they work? Smoothing, lower-than-market returns, along with “transparent and clear rules” seem to be the trick. more



An Australian government-appointed group has looked at wider challenges posed by an ageing population. Issues include ‘active ageing’ (to do with health, labour force participation and security). Housing issues need attention, along with ‘life-long learning’. more



The OECD looked (in 2008) at annuity markets around the world. As governments cut state pensions, private annuities should become more important. Why are such ‘rational’ products so unpopular? Can policymakers help? Should they? more



A World Bank report on Latin America praises ‘poverty-targeted’ over ‘categorical’ transfers. Its advisers construct a model that seemingly proves means-tested benefits are ‘more efficient’. The trouble is with the guesses. more



‘Debt literacy’ is a subset of financial literacy. In the US, the financially vulnerable have the lowest debt literacy and it costs them dearly. Behavioural economics can’t help. Debt issues require informed decisions, not ‘defaults’ or ‘opt-outs’. more



In the US, poverty rates increase amongst low-skilled workers in the ten years before age 62. That seems “closely tied” to work ability; about half of those with limited education report incomes below the poverty line. Social Security improves things from age 62. more



The World Bank has updated its 2000 summary of the world’s pension systems. There is much good data that may provoke local debate and the promise of some better information to come. Some comparisons are unhelpful. more



New Zealand has a high labour force participation rate amongst those age 55-70. Longitudinal data shows that health status is significant but declines in that are less reliable predictors of participation. The state pension start date is also significant. more



A review of progress on the implications of older populations in Latin America finds little to cheer about. By 2100, the age 60+ population will more than treble. Older populations are already “vulnerable”; social security systems need improvement. more



Most governments run their financial reporting systems on a cash rather than an accruals basis. Most of the reasons that private enterprises are required to use accrual accounting also apply to governments but with some particular wrinkles. more



Most OECD countries are now pulling back on pension entitlements after generations of improvements. But more needs to be done more quickly. Obstacles to reform are “not insuperable”. The “laggards should take heart”. more



In the US, tax affects the build-up of retirement assets in different ways. Looking at the tax treatment of occupational (Tier 3) schemes, Social Security pensions and direct share holdings shows the impact of possible policy options. more



Retirees in the US born in the 1940s (particularly women) have significantly greater access to pension wealth and also greater private wealth than those born in the 1930s. The gap between the top and bottom has widened; bottom quintiles have virtually no private wealth. more



In the US, health insurance has become an important part of total remuneration. Tax rules mean it’s more efficient for employers to meet the premiums but that distorts the significance of cash incomes. Allowing for that reduces apparent income inequalities, particularly for the old. more



111 years of returns over 19 countries show that shares outperformed Treasury bills, bonds and inflation. But for shorter periods, like the 30 years to 2010 in the US, government bonds returned a real 6.0% p.a., about the same as shares (6.3% p.a.). more



Australia’s compulsory Tier 2 can be improved by increasing contributions while retaining expensive tax breaks. The long-term estimates of pensions look relatively modest by comparison with other countries. Is that all that matters? more



Increasing financial knowledge improves decision-making and the acquisition of further knowledge in a US study. A model predicts portfolio choices and financial preparation for retirement. Further research will test those predictions against experience. more



The design of a so-called ‘compulsory’ Tier 2 scheme affects labour force participation rates as a ‘dynamic behavioural model’ of the rules in Chile seems to show. ‘Compulsion’ still doesn’t come close to ‘universal’ though it does mean increasingly complex rules. more



Australian taxpayers spend lots of money encouraging citizens to save for retirement. On public policy grounds, it seems difficult to justify that cost when tax breaks are regressive, inequitable and complex. They can, however, be improved. more



As baby boomers enter the pre-retirement ‘window’ it’s important to understand what might trigger the retirement decision and how that might be implemented. US data shows the impact on that decision of the type of pre-retirement employment and non-work preferences. more



Tax concessions for retirement saving cost a lot in tax revenue foregone. In the US, the cost is $50-70 billion for just 401(k) schemes. At least the cost is counted. Whether that cost can be justified given all the problems with tax breaks is another question. more



Ageing populations present potential fiscal challenges but also new opportunities. Public policies need coordinating to tap into the resource of experienced workers. Alarmist headlines are only one side of the story; outcomes need not be dire. 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



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 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



Tanzania has run two experiments that tested the implications of a Universal Pension. Applying the lessons to all older Tanzanians would cut poverty levels amongst the old by more than 50% and by about a third of all Tanzanians. That’s only one among many expected benefits. more



Canada has a long and varied experience with universal and means-tested age pensions. Universal benefits seem to improve the well-being of the aged (measured by group mortality rates), while means-tested benefits do not. What are the implications for pension design? more



It seems a puzzle that so many citizens pass up the additional remuneration and tax breaks that accompany Tier 3 occupational savings schemes. US 401(k) schemes are an example. Participation rates seem to have increased across cohorts in their early 50s. more



When individuals make retirement saving decisions, it’s important they understand how long savings might have to last when wages stop. A US survey shows that the chances of making it to retirement are consistently underestimated. Older respondents consistently overestimate survival chances. more



In the US, those with lower levels of financial literacy seem not to plan for retirement as much/well as those with higher levels. That is not very surprising. What it means though is that financial literacy must come first otherwise planning help is probably wasted. more



In the UK and the US, institutional arrangements (pensions, health insurance) directly affect the individual’s choice of retirement age. Overall, retirement rates are higher in the UK; and higher amongst wage and salary earners over the self-employed in both countries. more



Annuities can perform a significant role in the portfolios of the retired. A US study shows how annuities can provide their holders with a higher living standard and also how they might affect the asset allocation decisions in the rest of their portfolios during both accumulation and decumulation. more



In Hungary, the Czech Republic and Slovakia, pension reforms have seen more DC at the expense of DB. Apparently, DC is more secure than DB so the shift both changes and reduces risk for workers. But the risk ‘reduction’ is illusory. more



In the US, the number of years worked matters for Social Security pension entitlements. Who achieves their targets is changing and ‘fairness’ doesn’t have much of a role. Why these things should be so is another matter. more



Statistics on baby boomers’ preparedness for retirement need data on potential inheritances to be complete. In the US, the median expected inheritance for two-thirds of boomer households is $US64,000. However, getting it is rather uncertain. more



Accountants try to make things certain when they prepare an employer’s accounts. However, when it comes to a Defined Benefit, Tier 3 scheme, the employer’s accounting position is guesswork. No-one knows how much the scheme might cost but accountants still try to work it out. more



DC scheme members should run investment strategy, not the trustees. But who helps them make the ‘right’ choices? Regulation makes employers, trustees and managers reluctant. Default options aren’t robust; too much choice is bad; communication standards are indifferent. more



The US voluntary annuity market isn’t working properly. Retirees don’t understand what they need so they should be nudged into a test-run ‘annuity’ through a default distribution option. Unless they opt-out after two years, the trial becomes permanent. more



UK employers and others are interviewed for their views on where occupational pensions are heading. A long history of regulatory tinkering means that the employers’ leaders seem to have become disengaged from the pensions issue. more



From a pensions perspective, China is effectively several countries in one. Poverty amongst the old is a growing problem and will eventually need to be addressed across the country rather than provincially. more



The OECD looks at accounting practices for Tier 3 Defined Benefit schemes sponsored by listed employers. Mostly they were “quite underfunded” (though it had improved) and this was in 2007. Employers with 30 very large schemes tended to be in a better position. more



China started a new ‘experimental’ rural pension scheme in 2009. The central government will pay a basic pension and encourage local governments to add to that. Because that requires minimum participation periods, a universal pension would be better. more



Disclosure is an important component of financial products. Fiduciaries (and savers) need to understand who stands to gain from a decision to invest. But disclosure seems not to prevent conflicts and may actually increase bias: an unintended consequence. more



Australians are worried on a number of fronts about their compulsory Tier 2 schemes. A report on a sample of large schemes found poor levels of disclosure and ‘cosy’, opaque relationships between providers, sponsors and advisers. more



Poorer countries face burgeoning populations of older, poorer citizens. Contributory pension systems won’t do. A universal, non-contributory pension is the only possible solution: not just for poor countries. more



A 2007 report suggests ways of improving participation rates in US workplace-based Tier 3 schemes. Auto-enrolment, an auto-increase in contributions, and higher employer contributions would all help. This all assumes the employers want to pay more. more



Australia’s Cooper Review of compulsory Tier 2 schemes recommends a hands-on regulatory approach to scheme design and administration. The current arrangements do not deliver good value. It’s now time for the government to know what’s best for members, rather than Tier 2 providers (or even the members). more



Europe’s population is ageing, an achievement to celebrate. However, the public policy issues that presents to the EU25’s governments will not get easier and need to be faced up to now. The main things to talk about are neatly summarised. more



Tax incentives affect the way that households save but not necessarily the amounts they save. The case for retirement saving incentives seems insecure. It is better to make the economy more competitive and efficient. Citizens can then decide how and how much to save. more



The UK’s reforms seem to be proceeding in the face of the implications of the global financial crisis. The GFC has highlighted weaknesses both in what was done and what is now proposed. Time for a re-think. more



The UK’s reforms will ask savers and retirees to make more decisions that could have major impacts on retirement incomes. Helping them to make ‘sensible’ decisions will be a challenge. If the reforms turn out as expected, the old will have more wealth than now. They might need it. more



Australia’s mix of a Tier 1 income- and asset-tested pension along with a compulsory Tier 2 layer and expensive tax breaks for all retirement saving produces patchy outcomes, at best. After 18 years of full compulsion, 60% of pensioners have less than $20 a week in private income. more



A new look at New Zealand wellbeing and hardship numbers show that the old are relatively well-off by comparison with other groups. They also fair well in international comparisons so local retirement income policies seem to be ‘working’. Those with children are another story. more



The Irish government has announced the results of its thinking on pensions that started in 2007. As well as increasing the State Pension Age, it also wants something similar to the UK’s Personal Pension Accounts. Overall, this may cut the cost of pensions to taxpayers, but may not. more



The global financial crisis provides an opportunity to see whether current pension systems are working. In the EU, there are gaps in the ‘social model’. Pension reforms are needed to make clear the public role of “ensuring a decent standard of living.” That might be a start. more



People undervalue a life annuity; or rather don’t understand how expensive they can be. Many Americans would choose to swap part of their Social Security pension for a lump sum of lower value. Might that be a way of reducing pension costs? more



The global financial crisis undermines pension promises of all kinds. The World Bank urges Europe and Central Asia to stand firm despite falling economic output, asset values and contributions. It says the coming demographic ‘crisis’ will be much worse. more



New Zealand’s taxpayers face increasing future costs as public spending per head rises: demographically induced (and otherwise). Some changes to spending priorities will be better than others. Better growth rates will make most things affordable, including the Tier 1 pension. more



In the US, Social Security benefits are ‘paid for’ from an earmarked tax on payrolls. Whether the lifetime taxes are ‘fair value’ depends on the benefits; the present value of those depends on the discount rate. The balancing rate is 1.35% for benefits to equal taxes. more



Relative to the working age population, US ‘aged’ households are better off than had been thought: that’s if all the income they receive is counted. Key surveys miss or miscount things like work-place saving accounts, capital incomes and housing income. more



The so-called ‘retirement consumption puzzle’ (apparently precipitous declines in consumption after retirement) turns out not to be a puzzle. Looking at what US households actually do resolves most of the issues. The bottom quintile is a potential worry. more



The UK Pensions Regulator has surveyed pension scheme governance issues for the fourth consecutive year. Schemes themselves report that they are mostly in good order. It might be nice to find out whether that is in fact so. more



In Chile, the ‘more work-friendly’ compulsory Tier 2 scheme seems to have reversed the decline in labour force participation rates at older ages. That is apparently because a compulsory scheme rewards work and is actuarially fairer. Perhaps, but participation may well have increased anyway. more



Defined Benefit schemes in the Netherlands have pre-funding ratios that reflect the financial strength of the sponsoring employers. A higher level of risk in the employer’s balance sheet tends to mean higher risk (lower coverage and/or more equities) in the scheme. more



When employers want out of Defined Benefit schemes, they may want to get rid of past, as well as future promises. So-called “solvent buyouts” are more common in the UK than the US. So what does the UK experience look like? So far, so good. more



Annuities should be a popular investment choice for retirees because they can reduce uncertainty. But, in a voluntary environment, they aren’t. Perhaps that’s because of the way potential purchasers are asked. Perhaps not. more



US baby boomers have had a big impact on the housing market. Once they start retiring and downsizing, there might be more houses for sale than buyers. That will affect different areas differently, depending on the number of local baby boomers. more



The way households own assets, like shares and housing is unsurprisingly related to the way they are treated for tax. High marginal rates seem to shift assets from direct to indirect ownership. Inflation seems to decrease direct ownership where marginal rates are high and gains are taxed. more



Compulsory Tier 2 schemes (like Australia’s) need thickets of regulations to make everyone do as they are told. Another thicket now seems needed to protect savers from their apparent lack of interest in outcomes. Do employers need to be forced to make choices for them? And so it goes on.... more



Setting ‘ideal’ target retirement incomes at a national level is a difficult business. The major 2012 UK changes make this is a topic of some interest. Top down approaches to this issue are likely to be less informative than actually asking. The numbers do not look great in the UK on this basis. more



The Danish pension system is complicated. The ATP is a small part by benefits delivered at retirement but makes up for that by its complexity. The system as a whole seems doubtful about the ATP’s role, as well it might. more



A World Economic Forum report tries to widen the debate on the challenges of ageing populations. There is much new language, some ideas for debate but much that is familiar. It thinks universal pensions are good but only for “low income” countries. more



Most studies attribute non-participation in Tier 2 schemes to labour market characteristics (informal/part-time employment) or employers’ decisions. But workers might choose not to join and take jobs where ‘mandatory’ contributions are easily evaded. “Compulsory” may in fact mean ‘if I want to’. more



A New Zealand government report looks at poverty measures based on household incomes both before and after housing costs. Despite having little income other than the Tier 1 pension, the old are faring relatively better than other groups. more



The World Bank takes a third major look at national pension design issues. It’s a step in the right direction because its 1994 recommendations seem not to be working in countries that have followed the formula. ‘Social pensions’ might be the answer but more research is needed. more



A financial services provider has looked at New Zealand’s environment and made a number of recommendations – Tier 1 will be unaffordable so must be reduced; improve tax breaks for saving; make annuities affordable; improve home equity release. The trouble is with the evidence. more



In the US, current age-based pension qualifications should instead relate to ‘remaining life expectancy’. Among other things that would see the State Pension Age step out with improving life expectancy. Not only will that help growth, it would make pensions less expensive and relatively more affordable. more



New financial products, leverage and the greater connectivity of financial markets all contributed to the global financial crisis. Regulation and credit rating agencies were also found wanting. Perhaps economists’ belief in the rational representative agent was also misplaced. Popular modelling tools are seemingly mired in the past. more



Taxpayers’ money is saved following an increase in the State Pension Age when publicly financed pensions are deferred. A natural experiment in Portugal shows that hiring policies by firms are also affected. The state may (but may not need to) pick up some of the consequential costs. more



US Social Security delivers lower income earners higher benefits, relative to income. That’s the theory. In practice, many low earners receive low replacement rates. A flat dollar pension (plus a Tier 2 top-up) would more effectively direct protection where it is needed. more



All developed countries give concessionary tax treatment to retirement savings. In some cases, like Australia, the concessions’ cost is very large but at least Australia counts it - most don’t. Do the recipients of this middle class welfare need it? Might there be a better way of organising it? more



Some think that encouraging older workers to retire improves opportunities for the young. Not so – older retirements are unconnected with employment rates of the young. In fact it seems to be the other way round: more older workers seem to mean more opportunities for the young. more



In the US, micro-economic measures of wealth have diverged in recent years from macro-economic measures of saving. There seem to be signs of greater decumulation at older ages but ‘saving’ and wealth seem less connected now than they were. more



In Canada, the investment behaviour of Tier 3 schemes has changed over the 15 years to 2006 – more foreign investments and fewer local bonds; more trading gains on shares than dividends; increased investment in private equity and closer attention to corporate governance issues. more



Governments make rules, some of them very intricate, about the assets that retirement saving schemes can buy. The OECD summarises the rules in its member countries (and some others). The rules presumably try variously to protect the government, scheme managers and members. The ‘why?’ isn’t analysed. more



Retirement income systems should aim to eliminate poverty amongst the old. Amongst the rich countries, the OECD finds that poverty levels can be very high for those “of retirement age”. Poverty levels may not be correlated with the amount of a country’s “social spending”. The data need careful handling. more



Australia’s compulsory Tier 2 scheme is actuarially “fairer” than its PAYG Tier 1 pension. Making citizens pay for their own pensions reduces taxes on capital so should improve growth but recent tax changes might lower participation rates. Changes seem needed. more



Singapore’s Central Provident Fund is one of the largest, oldest compulsory Tier 2 schemes. Until 1993, nearly all the invested money was lent to the government on favourable terms. Now, savers can choose to put the money into unit trusts that cost more than they should. more



Australia is one of the few countries to count the cost of tax incentives for retirement saving. It’s now 20% of all tax revenue and totals 92% of the total amount spent on the Tier 1 “Age Pension”. The concession is very regressive and almost demands reform. more



Risk-based supervision of pension schemes is the rule in a limited number of countries. The challenges faced by four countries (South Africa, Kenya, Croatia, Germany and the UK) offer lessons to others. more



Chile’s 1981 pension reform created individual accounts for its compulsory Tier 2. A 2008 reform increases the generosity of Tier 1 pensions, but was the reform useful or necessary? Probably both. more



Vanuatu is another of the five Pacific micro-states looked at by the ILO from a social security perspective. It is probably the poorest with either no or low levels of formal social protection. It faces large challenges with few options. more



When financial service providers design saving schemes, it should not be surprising if higher cost options predominate among choices made available to savers. So it seems with US 401(k) schemes. As well, savers might not know what’s good for them. more



Much discussion about pension reform is based on analytical errors, tunnel vision, inadequate use of models and improper analysis of economic principles. Many claims for reform simply won’t be realised. There is no single, catch-all solution – a ‘first best’ approach doesn’t and won’t work. more



Projections made in the US to 2040 seem to indicate a greater disparity in total retirement wealth (public and private provision together) than in the early 2000s. Not much real change at the bottom but a lot at the top, due mainly to rising 401(k) wealth. more



One way some Americans move from fulltime work to fulltime retirement is through a process called ‘phased retirement’ (as opposed to ‘partial retirement’). Just how might that be defined and why should we be interested in it? more



A largish group of UK investment professionals seemed to avoid the excesses of the property boom as part of their retirement savings portfolios. Their investment in housing tended to be for living in, not for retirement income. more



Baby boomers will have more Defined Contribution-style assets and will need to spread them out over their retirement. Annuities can insure both the investment and mortality risks so why aren’t they more popular in the US? more



When a country introduces a compulsory retirement savings scheme, ‘new’ saving might be at least partly at the expense of ‘existing’ saving. For Mexico, so it turns out. More rules seem needed. more



The UK is thinking about institutional support for the new ‘personal accounts’ that start in 2011. For public credibility, it needs to be independent and use available expertise. Research offers some pointers for its development. more



Both Latin America and China are trying to change PAYG Defined Benefit pension systems to Defined Contribution, Tier 2 arrangements. Neither seems to be working well so what might the lessons be for both those countries and others? Don’t start from here seems one of them. more



Modern, socially conscious governments often need to know what to offer citizens in the way of material support when they can’t manage this themselves. In the UK, a “minimum income standard” is a new tool to show the cost of basic goods and services for different household types. more



Economic models can help us to understand the relative merits of different policy options. A 54 year global analysis is run forward to 2050 to see how returns to capital and wages might be affected by demographic change. However, it gets very complex, perhaps too complex. more



Americans are told they aren’t saving enough for retirement. Numbers on that are usually based on income replacement rates. A life-cycle model produces very different results – only 3.6% of households aren’t saving “optimally”. more



The IMF has reviewed the progress of pension reforms in Latin America. In many ways, they have not been as successful as had been hoped. Chile may be an exception but then again, maybe not. more



The Trustees of the US Social Security system issue regular actuarial reports. The 2008 report shows that the Trust Fund will run out of money in 2041. To restore ‘solvency’ contribution rates need to go up. Really? more



Voters seem to prefer social security systems that are pay-related (less redistributive) over those that are flat-rate (more redistributive). Linking benefits to contributions seems more acceptable to the “median voter”. But what if there are no contributions? more



The words ‘pension’ and ‘crisis’ seem inexorably associated with ‘ageing populations’ but politicians haven’t really done much to address the issues. We need to re-think the social contract. Consensus should be the foundation and we may need a new framework for the debate. 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’s a shame 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”. more



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. more



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 the only developed country with both income and asset tests that reduce the state’s basic pension. 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 or unemployment may be the real reasons for stopping work. Different countries have different experiences on this, driven largely by financial incentives - Europeans seem 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. more



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. more



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



The long-tail risks associated with annuities mean that private providers (employer-sponsors and financial service providers) are increasingly reluctant to take them on. The OECD looks at why annuity markets are under-developed and the challenges faced in encouraging their growth. 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 has 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 (Tier 3). So, how have New Zealanders responded? Apparently, mostly quite rationally. So what’s the problem? more



If a county 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



The 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. more



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 annuities. 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 has evaluated two decades of World Bank involvement in pension reform. Its report criticises the Bank for paying scant attention to non-contributory 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) gives 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 also be on the agenda. 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 those contemplating an increasing pension age. It’s not too late to start. more



Not many countries regularly count the cost of tax incentives for retirement saving. The OECD sheds some light on this complex task but falls short of some obvious questions. more



US evidence shows that a shift from Defined Benefit to Defined Contribution schemes 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. more



The OECD published, as a supplement to its biannual publication Financial Market Trends, a 111-page report that examines the governance of private pension schemes and the abuse of tax deferrals. more



The Trustees of US Social Security pension system have just issued their annual Report on its financial outlook, which is little changed from last year. Alicia Munnell explains. more



A non-contributory, PAYG, Defined Benefit pension is at the heart of this proposed reform of Germany’s complex, contributory social security system. more



A government-appointed group in New Zealand has recommended a national, auto-enrolment, Tier 3 retirement savings scheme. There was no evidence of New Zealanders’ under-saving. more



Australians seem not to reallocate their wealth in response to the ‘signals’ embedded in the means-tests for the Tier 1 ‘Age Pension’. If that’s just about ‘financial assets’ it may be so but there are other ways that Australians respond to those signals. more



A longitudinal survey of young New Zealanders will track personal experiences of financial education over 20 years at five-year intervals. Preliminary results of the initial data collection are reported. more



A US report suggests the application of behavioural economics’ principles to the process of converting Defined Contribution accumulations to annuities. Savers should be ‘guided’ into sensible decisions that should reduce risks. more



Australia has surprisingly high poverty rates amongst pensioners, despite a relatively generous Tier 1 and an intricately regulated Tier 2 that has been in full force for 22 years. Elder poverty levels could become a political issue. more



The global financial crisis had less of an impact in the US on retirement wealth and retirement patterns than might have been expected. Social Security wealth provides important underpinning support for the poorest groups. more



US evidence demonstrates, again, the ‘lump-of -labour’ fallacy: older workers who stay in the job aren’t denying opportunities to younger workers. In fact, prospects for the young improve with higher participation rates at older ages. more



The OECD compares Defined Contribution, occupational schemes across the US, UK, Ireland and Australia. There are similarities but also some quite striking differences. It’s unclear what lessons might be drawn. more



Respondents to a US ‘Residents Financial Survey’ looks at the geographic mobility of 2,617 residents of assisted and independent. About half had moved in during the previous two years; about 10% plan to move out in the following year. more



The poorest in any country can’t afford to pay for pensions so the OECD suggests all taxpayers should deliver a ‘basic old-age safety net’ that may be means-tested. ‘Informal’ workers need to be drawn into more formal arrangements. Perhaps. more



We can find out how long-term care arrangements are ‘working’ by asking people who use them. A US survey has gathered the data and that will provide source material for a range of reports. more



In the US, the ‘Long-Term Care Partnership program’ allows individuals to shelter wealth from future Medicaid asset-tests if private LTC insurance is taken out. LTCP does increase private provision but that’s only part of the test of success. more



A ‘health sustainability index’ is suggested as a way of allowing countries to measure their health systems and to identify innovations that will make a difference. That will allow countries to share what works. more



Natural experiments in Africa suggest, cautiously, that Universal Pensions reduce fertility rates. There are data issues but in countries with high birth and poverty rates, is this another social gain from a Universal Pension? more



An international study shows that financial literacy is “particularly severe” among women. That poses challenges with increasing requirements to make decisions about retirement saving, investment strategy etc. more



An OLG model shows that Australians would work longer if labour income were removed from the income-test for the Age Pension. Removing the investment income/asset tests would increase retirement consumption and ‘welfare gains’. more



Every five years since 2002, Australia has produced an ‘Intergenerational Report’. The three ‘pillar’ retirement income system looks in good shape. However, there are fiscal constraints ahead. The reports suffer from “assumption myopia” and are largely ignored. more



Faced with low current demographic pressures, high poverty, pandemics, corruption and very large ‘informal’ workforces, public pensions might be the last thing on Africa’s mind. However, the OECD suggests that now is the time to talk about pension reforms. more



The OECD looked (in 2008) at public policy options associated with the decumulation phase of the retirement saving project. They are a balancing act between flexibility and income protection. Poorly functioning annuity markets are an impediment. more



In the US, older people have less-than-ideal levels of financial literacy and sophistication. With the rise of Defined Contribution schemes, individuals are being asked to take on tasks for which they seem singularly ill-equipped. Targeted education programmes seem the only way forward. more



Pakistan faces significant pension issues associated with an ageing population. The current arrangements together suffer from low coverage, inequities and inadequacy. A pre-funded Tier 2 system in the Latin American mould seems to be needed. more



US Social Security is taxed at higher levels of benefit – a form of means-test. Some suggest the benefit formula should be weighted to limit reductions for those least able to afford them. A combination of reductions and an income-test seems preferred. more



Swiss retirees seem to choose to annuitise retirement savings at rates not seen elsewhere. The reasons seem connected to deep regulatory involvement, tax breaks and elimination of market risk. The deal is too good to miss; but someone (always) pays. more



Italy’s state pension system has seen major reforms since 1992 including a shift to an NDC basis in 1996. A model looks at the potential implications of reforms on the choice of retirement age. The shift to NDC seems to increase pension-starting ages. more



Canada thought about increasing the scope of its compulsory Tier 2 scheme but settled instead for an arrangement based on behavioural economics’ ‘nudge’ principles. Some think that is a mistake; more compulsion seemingly the ‘better’ answer. more



The traditional life-cycle model seems not to explain retirement wealth outcomes. Adding parents’ contributions into the equation improves things. Households’ retirement savings and wealth accumulation seems more understandable. more



A review of a report on Mexico’s ‘failed’ social security system suggests that proposals seemed to lack a firm foundation in data and in theory. The original report produced a strong economic case but “weak” analysis of the political economy. more



Financial provision for retirement is about much more than savings accounts. For the average US household, an optimal investment strategy is much less important than other options such as working longer, budgeting or reorganising housing. more



Taiwan’s pension arrangements are very complex. There are four main, different programmes: one is non-contributory; the others are contributory and two heavily tax-subsidised. There is little information on how it all works but gaps are likely. more



Most developed countries face the need for substantial reform (reduction) of pension entitlements. Politicians understand the risks they run – a look at the political dimension in 20 countries highlights large, unexplained, cross-national differences. more



No-one really knows why US retirees choose not to buy annuities. It used to be put down to the ‘bequest motive’; subsequently to uncertainty about health costs. The bequest motive now seems the better explanation. more



Pensions now matter to those making country-allocation investment decisions. ‘Excessive’ pension spending and a lack of private provision makes countries vulnerable and less attractive to investors. “Intergenerational political conflict” is a concern. more



The EC thinks its member states should sort out their pension systems. A White Paper makes a number of recommendations and labels the issue “urgent”. Citizens need to work longer and save more while governments need to encourage private savings. more



The US Pension Benefit Guaranty Corporation, government-owned, underwrites the delivery of private Defined Benefit, Tier 3 pensions. Supposedly risk-related premiums are levied but, in the end, underwritten benefits are at the expense of well-run schemes and/or taxpayers. more



Given that the US Social Security Trust Fund is predicted to run out of money by 2041, what might people do if their pensions were cut by 30%? Apparently, they would delay claiming and work longer so the average effective reduction would be only 20%. more



A review of Africa’s social security systems finds some hope but much to worry about. Something called ‘Dynamic Social Security’ seems the way forward with ‘at least modest levels of universal social security’. The challenges seem significant. more



Australia has a sovereign wealth fund that received the proceeds of the partially privatised telecoms company and fiscal ‘surpluses’. Some suggest an SWF might smooth the gains from the mining boom but that might hurt Australia’s future prosperity. more



Local labour market conditions have a direct impact on the ‘work to retirement’ transition. The higher the local unemployment rate, the lower the rate of voluntary exits at a ‘retirement age’. The effect is more pronounced for males. more



National saving rates are much lower than they used to be. Modelling data from the US, Italy and France seem to point the finger at “immediate gratification”. Whether that matters for future patterns is another question. more



When the state prescribes Defined Contribution for retirement saving, member choice risks so many things going ‘wrong’. The UK’s new Tier 3 NEST scheme illustrates those risks from opting-out through to sub-optimal annuity purchases. more



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



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



Decisions by US workers to retire seem to be driven as much by healthcare insurance issues (public and private) as by availability of the Social Security pension. The State Pension Age is increasing but the Medicare eligibility age is not. more



China’s pension arrangements are inconsistent and clearly don’t work. Change is therefore essential. A ‘pension-tested’, otherwise universal, low-level Tier 1 benefit would improve things. Papering over ‘empty’ Tier 2 accounts won’t. more



Pensions in the UK are up for review, again. However, it’s different this time. The government is looking at real reform; simplification rather than complexity. Perhaps poverty issues amongst the old are now on the agenda. The decisions don’t look hard. more



Choosing the optimal retirement age is complicated. It should be a function of personal, financial and employment issues that will vary infinitely across populations and countries. It isn’t clear why people might try to model optimal household behaviour, but they do. more



In Germany, occupational pension coverage is falling. The reasons range from the impact of tougher accounting standards and historical practices to ‘demand-side’ factors. Despite upcoming pressures on PAYG state pension promises, younger employees seem less interested in pension savings. Should Germans be worried? more



We tend to measure a standard of living by before-tax income and saving targets as a percentage of pay at retirement. Real life is more complex: spending patterns change over time and life cycle models do not usually cope with such subtleties. They should, especially when measuring risks. more



Part of Chile’s compulsory Tier 2 savings scheme comprises compulsory disability/survivor’s insurance managed in a similar way to (and parallel with) retirement savings. Chile’s disability claims are apparently lower as a result. Whether that is necessarily a good thing seems another issue. more



Since 1978, UK retirees could shop around to get the ‘best’ annuity (the ‘Open Market Option’) for their retirement savings. Only one-third exercises this option despite clear financial rewards from doing so. There are several reasons for this ‘irrational’ behaviour. more



In an example of the Law of Unintended Consequences, the UK tried to provide Defined Benefit, Tier 3 scheme members with greater security in 2004. Forcing employers into prescribed ways of doing things means they will probably wind up the schemes. Members will then be on their own. more



In the UK, the potential effect of tax options on pension costs are examined in the context of state pension reforms. Three scenarios produce widely differing potential outcomes. There will be many more savers but probably less money in pension funds. more



Housing wealth and its consumption is much misunderstood. In the UK, housing mobility at older ages is markedly lower than in the US. That is influenced by subsidies, climate, health expenditures and more. Better information is needed. more



When US 401(k) members retire, they can take a lump sum or buy an annuity. A high proportion takes cash (or rollover) and, after 10 years, a sample seems satisfied with their decisions. Financial literacy seems to help; uninsured medical costs in retirement, a worry. more



UK employers with DB schemes need to understand the longevity risk associated with improving mortality. Countrywide numbers may be different at the employer level. If employers (and their advisers) don’t pay proper regard, regulators will focus their attention. more



As retirees age, we should expect their wealth to decline as they ‘decumulate’ retirement savings (including DB pensions, both state and private). In the US, that seems not to be happening. As retirees get older, their ‘assets per remaining year’ seem to increase. more



Public pensions are not the only potential source of fiscal strife for governments. The pensions the state pays its own employees are also significant. The UK government is reviewing its options: should it tinker or reform the way it does things? more



In the US, the rules allow savers in Tier 3 401(k) schemes to borrow against their accounts in the scheme. Is that good public policy? The answer seems equivocal. Improving the rules might tip the balance but more information is needed to be certain. more



State benefits in the US are the means-tested SSI at Tier 1 and the contributory Social Security at Tier 2. Given the heavy income and assets tests in the SSI, only 14% of the elderly get any of the very modest, SSI. Only about half of the entitled take up their benefits. more



Should the retirement saving schemes of public employees be fully pre-funded? A US report suggests not because taxpayers mostly have debt that costs more than the employer’s discount rate. The answer will be different for private employers. more



Most agree that annuities are an efficient way to decumulate retirement savings. In the UK, there seem to be major hurdles in the way of their widespread adoption. Perhaps government-issued longevity bonds might help everyone, including the government. more



A US financial service provider looked at its customers’ Defined Benefit schemes in 2007. The previous six years saw a significant shift towards Defined Contribution. One fifth of respondents had frozen benefits and 26% had closed schemes to new entrants. more



US official measures of poverty amongst the old do not provide a full measure of hardship. Poverty rates might be 57% to 89% higher than the official number. The old poor are very vulnerable to changes in government-financed benefits. more



Chile’s Tier 1 pension was substantially improved in 2008 because of problems with the compulsory Tier 2 arrangements. The expected costs to taxpayers will be high as two-thirds of pensioners will benefit. Tier 1 benefits more the lower-paid, self-employed. more



After 18 years of full compulsion, Australia is finally asking some questions about why things are done as now. Two extensive reports review most aspects of the current arrangements and conclude that more regulation is necessary; but they avoid some fundamental questions. The ‘Overview’ is first; then ‘MySuper’, a reshaped member-centric future. more



US states and local authorities try to pre-fund employees’ pensions. The GFC has made full pre-funding less likely for most and coverage ratios are expected to fall to 72%. Hoping for the best seems their only option. Really? Why not move to DC and ‘total remuneration’? more



Australians are forced to save for retirement through Tier 2’s SG accounts that are funded largely by employers’ contributions. A longitudinal wealth study (HILDA) shows they didn’t save a lot in the four years to 2009: A$300 a year on average, despite compulsion. more



Over the two decades to 2005, US families seem to have been saving quite a lot, despite macro-economic evidence to the contrary. Wealth rather than an absence of spending seems a better indicator. As ever, the data could be better. more



The global financial crisis is focusing the minds of pension policy makers in the EU. A report describes some of the pension options that EU countries are implementing. “Tough policy decisions” seem indicated; quality data an essential starting point. more



The UK’s complex pensions landscape will get more complicated when the new auto-enrolment NEST gets underway. It will change the face of pensions, perhaps in unexpected ways. Perhaps fewer Defined Benefit accruals; more Defined Contribution and a smaller employer involvement? more



In the UK, social welfare programmes are funded mostly with a tagged tax called National Insurance contributions. There are 3,400 civil servants responsible for making sure workers and employers pay the right amounts: at no small administrative cost. more



A longitudinal survey of New Zealanders’ saving habits seems to reinforce the already known: before KiwiSaver, they did not appear too irrational. Why the government needed to start KiwiSaver in 2007 remains a mystery. more



Mexico City started its own Universal Pension in 2001 and it has been very successful. The PACAM was sold as a right of citizenship, rather than as poverty relief but it seems to do that well enough. So how did a city decide to go it alone on pensions? more



A 2007 report on household debt from the US Federal Reserve was published just as the global financial crisis started. The large rise in debt was about smoothing consumption off the back of rising house prices and financial innovation. Not too much to worry about (in 2007). more



Zanzibar is a very poor part of a poor country (Tanzania). The old seem particularly poor and many are responsible for raising children. A Universal Pension of 20% of per capita GDP would make all the difference. This seems an efficient way to deliver direct monetary aid. more



Public ‘pension reserve funds’ have great potential political use. A 2008 OECD report tested eight countries’ reserve funds against six basic requirements and found general compliance. Some could do a little better. more



The Swedish NDC pension scheme is supposed to partially link contributors’ retirement income expectations to investment returns. Recent returns should have triggered a largish automatic reduction in pensions. It didn’t – the politicians have decided to spread the reduction. more



In Australia, retirement savings are inversely related to the number of children individuals have. Not too surprising for women as compulsory, Tier 2 contributions are directly connected to work and income. More surprising is that this can also apply to men. more



Public pension schemes have tended to produce poor investment returns. A World Bank 2008 review of four countries’ ‘new’ public schemes details some lessons for other countries that want to do a better job. more



Europe’s accountancy standard setters don’t like the IASB’s proposals for pension reporting. Among other things, the IASB thinks the employer’s financial accounts should try to guess whether the employer might be able to afford future contributions. Europe demurs. more



There is no shortage of cheerleaders for Australia’s compulsory Tier 2 retirement saving scheme. The global financial crisis seems not to have weakened the case for compulsion but it would be nice if that conclusion were based on sound data and solid logic. Not so here. more



Employees in the US seem irrational when contemplating 401(k) Tier 3 saving schemes. They do not seem to do what is clearly in their best interests. There are many reasons for this but financial literacy and trust (or a lack of those) seem important. more



In 1998, Taiwanese employees of listed employers had about half their portfolios in their employer’s shares. A 2007 report questions the investment rationale of that exposure and offers potential lessons for advocates of privatising social security arrangements. more



In 2008, US 401(k) balances fell by an average 24.3% in 2008. Average balances increased over the five years to 2008 by 7.2% a year from both returns and contributions. The difference between the median ($US12,655) and the average ($US45,519) shows a skewed distribution. more



The US Social Security Administration collects information about the aged (65+). The latest (2006 data) looks at all types of income. Median real income has risen over the years – marital status and age are significant qualifiers. Poverty levels have grown slightly in five years. more



A 2001 report looks at the impact of Australia’s compulsory Tier 2 retirement savings scheme on women. The results are predictable – lower pay and interrupted working lives mean lower expected private provision; also greater reliance on the income/asset-tested Tier 1 pension. more



Defined Benefit, Tier 3 schemes in the US were targeted in 2006 by new legislation that aimed to protect members and provide more transparent reporting. It seems the new law is the final straw that signals the demise of DB schemes. Not necessarily a bad thing. more



The UK’s new Personal Accounts will have a big impact on workplace retirement saving arrangements. The numbers of members will increase but, over time, total contributions could actually come down. That depends on how employers react. more



Taxes are usually a ‘this year’ calculation; that’s how we pay the state. Pensions are rather different – age, employment history – sometimes residence, contributions all matter when the state pays us. What implications does this dichotomy have for the tax treatment of pension savings? more



The European Commission reports on the economic impact of ageing populations over the next 50 years – low birth rates, longer lives mean higher pension costs. There could be another 59 million immigrants but the median age will still increase from 40 to 48. The news is not new; the recommendations unsurprising. more



Annuities help retirees to reliably run down savings with some confidence that income will continue until death. But in the US they aren’t very popular. Perhaps it might help if 401(k) retirees were forced into a partial annuity. Perhaps not. more



In Vietnam, poverty levels among the old are similar to the population as a whole – about one in five. Having an old person in the household is less significant than being in an ethnic minority or having children. Public transfers go disproportionately to the ‘unpoor’. more



Should regulators limit the amount pension schemes invest in hedge funds? First they need to find out how much money is in hedge funds and that’s not easy. Whether pension schemes should have any money in hedge funds is another issue. more



Half of US workers seemingly aren’t saving for retirement so the government must intervene. Lessons can be learned from other countries. There has to be a “low cost system” and workers must start saving as soon as they start working. The evidence for intervening seems sparse. more



Compulsory Tier 2 schemes need lots of rules, especially if the scheme partly replaces the state’s pension obligations. Defined Contribution Tier 2 schemes face an additional hazard – the investment risk. The OECD wonders whether more rules might be necessary. more



Perhaps behavioural economics has got the retirement saving issue wrong. In the US, savers seem to be ‘irrationally prudent’, rather than ‘irrationally spendthrift’. That may mean they are saving too much, rather than too little. Perhaps, citizens don’t need the ‘protection’ provided by behavioural economics-based policies. more



The World Bank’s From Red to Gray looks at the implications of Eastern Europe’s rapid ageing. Chapter 3 looks at the impact of demographic change on savings and financial markets. In short, Eastern Europe probably faces a different future because of its past. more



In Italy, it seems that the previously falling birth rate was caused by high pensions. Now, those who have lower expected pensions have higher fertility. Children seem to be seen again as ‘old-age security’ for those who can’t save ‘enough’. Is this causation or correlation? more



Most savers for retirement choose (or are required to use) pooled saving products. Legalistic disclosure regimes impose real barriers to understanding, especially on fees. A six-country review shows they are rarely clear, mostly complex and often misleading. Pity the poor saver. more



The US is endlessly fascinated about when its Social Security system for Tier 2 pensions will run out of money. The government now says it will happen in 2049. One of the problems with these numbers is that they won’t happen. Social Security ‘contributions’ are just another tax. Tax changes; benefits change. more



The restructuring of state-owned enterprises in China in the late 1990s saw sharp declines in the employment of urban residents. Early retirement and the exit of older workers (mainly women) were the main contributors. Generous early retirement pensions encouraged the downsizing. It seems they might now be returning. more



In Latin America, where Tier 2 DC schemes are supposedly taking the retirement saving risks private, governments don’t let members make the investment decisions. What will probably be one of the saver’s largest assets can’t reflect their preferences. more



Over the last 25 years, the focus of US retirement saving has shifted from Defined Benefit to Defined Contribution schemes. Before the global financial crisis, total pension wealth (including Social Security) was projected to double over 40 years and the increase will affect DC schemes most. more



A cross-country comparison of the health status and expectancies of older Europeans showed more variation in health than mortality. A healthy old age should be desirable in itself but becomes an important objective if we want older people to work longer. more



Poorer people in the US may behave in the same idiosyncratic way as richer. The trouble is that the poorer have less room to move. Their ‘mistakes’ seem to matter more so ‘aggressive’ marketing tactics may do them greater harm. What might this mean for public policy? more



US savers who can choose their investment strategy in their 401(k) plans seemingly make some serious mistakes that cost them real money. A study of nearly 3 million accounts puts the cost (lost returns) at between 0.6% and 3.5% a year. But that was before the 2008/09 meltdown. more



An unusual circumstance allowed a Tanzanian experiment on the impact of a low level, income-tested pension in an HIV and AIDS-affected community. The value of the difference the small regular amount made to the recipients seemed to significantly exceed its cost. more



Recent pension reforms in Austria have reduced benefits so that by 2050, pensions will cost ‘only’ 12.2% of GDP. Modelling suggests that Austria’s GDP will be boosted both by encouraging the older to work longer and by reducing the tax burden – but not by enough. more



In theory, people decide rationally how much to save based on individual trade-offs between immediate and deferred consumption. However, the way the decision is presented (‘framing’) seems to affect the decisions of US savers. Perhaps so. more



A ‘fallacy of composition’ says that what’s good for one person isn’t necessary good for a group. So it is with saving: that’s because $1,000 saved is $1,000 not spent. Saving might raise the saver’s wealth but not necessarily the country’s. Spending may be more important than saving. more



World share markets lost $US30 trillion in a year – that’s about half their value. Savers around the world have been punished heavily. How did it start? US housing, mortgage finance, rating agencies along with poor regulation and information all share the blame. Lessons must be learned. more



If governments regulate pension providers, telling them about their responsibilities and how they might implement those more effectively seems sensible. So it turns out – but an international study shows not many regulators are required to educate providers. more



In the US, the rules governing pre-funding levels in Defined Benefit schemes changed in 2006. After the events of 2008, surpluses may not be the issue they once were but, given the tougher rules, is the tax treatment of ‘reversions’ to employers fair? Probably not. more



A 2007 survey of the sponsors of US Defined Benefit pension plans showed that one third had closed or frozen plans in the previous two years. Another one third proposed the same in the coming two years. Employee benefit strategy and new rules are driving the changes. more



When governments try to ‘improve’ retirement savings behaviour, they are often unsuccessful. New Zealand’s KiwiSaver may re-prove that but will also increase inequality while acting against other government policies. New Zealanders should be unhappy about that. more



Actuarial adjustments to the US Social Security pension for early and later payment are supposed to be financially neutral. Seemingly, they do not allow for individuals’ preferences so people work less than they might have and tend not to ‘partially retire’. more



The US has seen a large shift of retirement saving provision from Defined Benefit to Defined Contribution over the last 25 years. Projections show there will be very large amounts in DC plans by 2040. more



Everyone who saves for retirement through a financial product or by direct investment in shares, bonds or bank deposits participates in international money markets. The number of savers and the amount of money involved have mushroomed. That seemingly contributes to volatility. more



Tax incentives encourage people to save for retirement, don’t they? They may not actually do that but that’s not their only problem. Most tax benefits go to richer savers, rewarding them for what they may have done anyway. What should the US do about that? more



In the US, Tier 3 401(k) schemes (and their equivalents) usually offer lots of investment choices – too many say some. Amongst all those choices, schemes seem typically to offer ‘efficient’ options when compared with conventional performance benchmark indices. more



In the US, the proportion of retired home-owners and the proportion of housing equity in overall wealth have been relatively static over 20-30 years. Housing equity can be released post retirement but retirement-specific wealth is likely to become more important over coming decades. more



Southern Africa has a cluster of four countries with non-contributory pensions. The historical reasons for their development vary but the reasons for their continued existence now seem similar. more



Social security pensions apparently have adverse effects on net marriage rates, total fertility rates, private savings, some schooling attainment measures and per capital growth. So says a model applied to 32 year, 57 country data. more



Surprisingly little attention is paid to the small number of ‘universal, non-means-tested’ pension systems in the world, despite their attractive features. The pensions world seems focussed on forcing citizens to save. Addressing old-age poverty might be more useful, even for poor countries (but not just them). more



Shareholders (and others) need to know the expected cost of Defined Benefit pensions that managers promise former employees. Past rules had unintended consequences. Is the proposed IAS19 any better? Probably not. more



The trustees of UK pension schemes pay high fees to fund managers to, among other things, beat the market. By hiring managers to pick which markets to be in, they want higher returns from the professionals. Do they get better returns? Perhaps - or perhaps not. 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. more



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. It would be nice if the data showed New Zealanders were behaving badly. The evidence is equivocal. 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 schemes 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 schemes (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 re-arranging 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. more



The world of workplace 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 that are under pressure to cut ageing costs must hope 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 World Bank 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 the 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 politics of saving are often more pronounced than the data. Information from New Zealand sheds needed light on the influence of housing on saving behaviour. more



Do tax breaks for 401(k) increase household wealth? This complex question has a surprising answer – possibly. And by a whole lot less than might be expected. 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. more



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 1998, Sweden’s ‘Premium Pension’ carved out contributions that were credited to notional accounts where contributors can choose strategy. Most chose a manager at first. Now less than 20% do – the rest are in default options. more



Thailand went from very low coverage at Tier 1 to very high. Though not a Universal Pension, the so-called ‘500B pension’ has cut the poverty rate amongst the old in half for less than 2% of GDP. more


The younger retired in the US seem to invest less in ‘risky’ assets than they should. That is related to subjective expectations. Information and education might address this apparent ‘welfare loss’. more


Governments often have intricate investment rules for DC schemes, especially for those at Tier 2. That’s because they usually have a stake in the outcomes. A 2009 OECD report looks at the reasons for those. more


A line-by-line comparison of the retirement income systems of Australia and New Zealand shows two things: such comparisons are very difficult and there isn’t a lot of relative difference overall, despite first impressions to the contrary. more


The UK government is reducing pension benefits for its own employees. The average value will reduce by about one-third. Whether the government, as employer, should have any occupational pensions is another question. more


Target date investment options are probably better than a ‘one size fits all’ strategy but both are sub-optimal compared to a strategy that takes account of the household’s (not saver’s) risk preferences. Those include labour income risks. more


Pension assets hit a new high in 2012 and have now more-than-recovered the 2008 losses. Local, real returns varied widely from +12.1% (Denmark) to -10.8% (Turkey). Cross-country comparisons support more pre-funding. more


A 2009 OECD report looks at the risks, rewards and trade-offs between private DB schemes and DC schemes. Apparently, hybrid schemes are more efficient and sustainable. ‘Conditional indexation plans’ seem best. more


The increasing numbers who end up in care mean that we need better data on what happens to those in ‘assisted living’ or ‘independent living’ institutions. A US ‘Residents Financial Survey’ looks more closely at the data. more


The EU’s Stability and Growth Pact faces the challenges of differing pension systems and ageing populations. ‘Inter-generational neutrality’ will make targets impossible. A ‘clear framework’ is needed. Perhaps. more


In 2007, US private, occupational Defined Benefit schemes were about $84 billion underfunded. A one-year ‘unexpected’ increase in life expectancy would double that. That’s apparently a “likely scenario”. more


If state pensions are to be properly managed, valuing the liabilities and cash flows at a risk-free return is a political rather than an accounting statement. Managing pension flows needs a more market-related valuation process. more


Workers’ retirement ages are influenced by the nature of the work they do. A 38-country analysis confirms that the ‘effective retirement ages’ in countries are therefore directly affected by the ‘occupational composition’ of their workforces. more


The ‘Global Financial Crisis’ has highlighted the value of financial literacy. Russian data indicate that the more literate seemed to withstand the GFC’s impact better and better adjusted to unexpected macroeconomic shocks. more


Said quickly, paying pensions to those who don’t need them sounds sensible. However, the devil is in the detail as illustrated in South Africa, Australia and the UK. A means-test is really another tax that generates unintended consequences. more


US retirees (born between 1931 and 1941) seem to have their retirement income ‘replacement rates’ relatively well sorted. The median rate in years 1 and 2 was 73.5% pre-tax with one quarter greater than 100%. more


When governments force citizens to save for retirement, they inevitably get drawn into the fees’ issue. Providers’ interests do not coincide with the best interests of savers. The OECD looked across countries’ mandatory arrangements – Sweden emerged as the cheapest. more


Financial mistakes cost US retirement savers billions of dollars a year. Information and education seem the only possible answer. Who is best placed to deliver that? There seems much to be done before ‘ordinary’ people can get the help they need. more


New Zealand households saved quite a lot between 2004 and 2006 despite ‘macro’ numbers that seemed to say otherwise. A longitudinal study shows why finding out what savers are actually doing is more important than asking them what they think. more


US households from age 65 to 85+ look to have significant retirement wealth. But ‘snap shot’ views are less informative than longitudinal studies, as a look at households from age 70+ in 1993 to age 87+ in 2008 shows. Health and asset levels seem correlated. more


US labour force participation rates amongst older workers have risen since 1995. However there has been no increase by ‘remaining life expectancy’. Regardless, the ages 62 and 65 (of significance for Social Security) “strongly” affect participation rates. more


When Norway started to reduce its earliest pension age (from 67 to 62) not all employees had access to that and so a natural experiment was created. The earlier retirement ages seemingly had no impact on subsequent mortality. more


US Social Security is a Defined Benefit, PAYG pension, financed largely out of current contributions. Partial privatisation and benefit reductions have been suggested. Different reforms will affect beneficiaries’ work/retirement decisions; also the capital/labour ratio. more


Australia’s compulsory Tier 2 scheme is 20 years old. Is it working? It seems to induce early retirement and higher debt and, for most, will probably miss the target retirement income. But it is still only 20 years old. Higher contributions and time may help. more


The US State Pension Age is now age 66 (increasing to 67 by 2027). Reduced pensions can be claimed from 62; increased from as late as 70. Slightly less than half claimed from age 62; about one quarter from age 65+. Monthly variations are analysed. more


Governments that subsidise retirement saving can justify benefit restrictions. The South African government proposes to strengthen those, including compulsory annuities and closer fund governance. A report called for submissions. more


The Mexican 1943 social security arrangements aren’t working. Modelled on the Bismarckian system, they cannot cope with widespread ‘informality’. The answer, apparently, is to ‘strengthen’ revenues with a consumption tax. more


US unemployment and mortality rates seem linked – death rates fall in a recession. Amongst the old, that seems related to nursing home care quality. It’s harder to get quality staff when unemployment falls so mortality worsens. more


If savers seek advice, we might expect behavioural biases to be corrected. A US study suggests instead that those biases seem exaggerated and have added to them the advisers’ own self-interests. The study raises further questions. more


Private pension wealth (mostly Defined Benefit) in the US comprises about 20% of the retirement wealth of ‘early boomer’ households. The ‘global financial crisis’ has not affected this group and so won’t delay retirement by much. The job market will affect the position. more


The occupational pensions for Dutch civil servants reduced in 2006. Those born before 1 January 1950 kept their benefits. The change affected mental and physical health but that varied by household composition. The affected saw the change as unfair. more


Banks that owned Argentine pension schemes kept getting deposits from the schemes despite worsening fundamentals. The IMF thinks that pension schemes exert market discipline on unrelated banks but banks should not be allowed to own pension schemes. more


Commentators worry about governments’ unfunded (or under-funded) pension promises for their own employees. Reporting of these is inconsistent so the OECD has tried to work out comparative ‘implicit pension debts’. The numbers look large. more


For investment performance, size seems to matter. A large dataset shows that returns on the largest plans are 0.43% to 0.5% a year higher. Most of the ‘extra’ performance comes from higher returns; about one third from cost savings. more


A New Zealand financial services industry group proposes long-term increases in the State Pension Age. If Kiwis still want to retire at 65, the savings gap will be filled by an augmented, annuitised, ‘KiwiSaver+’ with some government guarantees. The proposal needs more work. more


The US Social Security benefit is explicitly progressive – the formula favours the lower paid. Almost as a side effect, it also provides “insurance against negative idiosyncratic shocks” and, in the end, provides (ex ante) a fairly ‘flat’ replacement rate. more


Once governments start mandating retirement saving arrangements, they really have to control everything. Mexico’s AFORE-based Tier 2 illustrates that with fees. Private managers cannot seemingly be trusted to look after savers’ best interests; though they probably disagree. more


HelpAge International has started a useful web site that details the ‘social pensions’ in 85 different countries. Comparative data is available on Universal Pensions, ‘universal minimum pensions’ and ‘means-tested pensions’. more


The OECD has updated Pensions at a Glance for the Asia/Pacific region. It has useful summaries by country of public and private pension systems and suggests that time is running out for reforms. ‘Replacement rates’ divert the report unnecessarily. 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


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


In the US, Social Security claimants can choose when to start their pensions. Actuarial adjustments to the annual amount try to make that decision financially neutral. It seems that claimants generally respond as expected. More targeted information should improve decision-making. more


In the US, pension promises by states to present and former employees aren’t supported by enough assets. The choices are higher taxes for everyone, higher contributions from employees, reduced benefits or a mix. Someone has to ‘pay’. more


Governments in the developed world face some hard choices. Age-related expenditure will increase, perhaps to levels that require cuts and/or tax increases. Increasing the retirement age (not the State Pension Age) seems a powerful option. more


Dutch savers don’t understand share markets either and need educating. Savers need to understand the potential losses of not owning shares. Governments have an indirect stake in this because low returns during accumulation means smaller retirement incomes. More literacy is needed. more


People save for many reasons - homes and retirement are the main ones. In the US, the number of children has an ‘important’ influence in explaining wealth disparities. The more children there are, the lower the wealth accumulation. What that might mean is, perhaps, another matter. more


Latin America is discovering the devil in the detail of compulsory, DC, Tier 2 savings schemes. Copying Chile’s 1981 reforms hasn’t fixed the retirement income issue; tinkering continues in most of Latin America as coverage levels, especially, continue to underwhelm. more


In the US, ‘Early Baby Boomers’ are expected to work longer than the ‘War Babies’. Depending on age, the increases range from 5-10 percentage points. That’s good news for Social Security and for the economy; also for the workers themselves, financially at least. more


In the US, some types of saving (like 401(k) schemes) are technically ‘elective deferrals’ of otherwise taxable income. Over the 1990s they grew rapidly and, unsurprisingly, the more highly paid have more than others. Official numbers show the position to 2001. more


So-called ‘life-cycle’ investment options are a bit of a cop-out and a reflection of savers’ unwillingness to make their own decisions. Even US professionals seem not to follow the ‘rule’. And anyway, will the future be like the past? Probably not. more


Public sector pensions are under scrutiny the world over. What was their origin and are they relatively too generous? In some cases, perhaps so but unless we know employees’ ‘total compensation’ we cannot really tell. more


Swaziland is another poor country where a near-universal pension has positive social consequences. That the old tend to be responsible for the young multiplies that advantage. More good food for the whole family is just the start. Higher social status and dignity follow. more


A 2008 briefing from the US government looks at the implications of partially pre-funding some Social Security through personal accounts. The proposal looks less attractive for the government’s finances as a whole. The money for current benefits has to come from somewhere. more


In theory, the retirement saving project can be about aiming towards a target regular income, allowing for other assets and state incomes. If large numbers saved on that basis, some of the traditional models may not cope with returns that are larger (or smaller) than expected. more


In the US, out-of-pocket health costs affect the retirement age. Those with expected health costs at about the 90th percentile retire about a year later than those at the 10th percentile. Though seemingly material, the results are apparently only “marginally” significant. more


In the US, changes in the financial and savings environment mean that the retirement date will probably be more influenced by macroeconomic factors. The style of transition from fulltime work to fulltime retirement is also changing. more


New Zealand’s Retirement Commissioner must review the country’s retirement income policies to see if they are ‘working’. The 2010 Review suggests some changes, including an increase in the State Pension Age from 65 to 67 between 2020 and 2013. Much is as it should be. more


The decision to retire should be related to both health and wealth. New Zealand data confirm the first (health) but not so much the second (wealth). The start of the Tier 1 pension (New Zealand Superannuation) from a fixed age 65 also seems significant. more


During 1998-2007, many US listed firms reduced their exposure to Defined Benefit schemes. Most of the financial savings achieved have come from avoiding accruals in relation to future pay increases. The type of change is driven by the financial state of the sponsor. more


Most think that financial education is a good thing; the more the better. That puts the responsibility for poor outcomes on savers. A US report suggests that is not enough. The missing elements are hands-on help, defaults, transparency, proper incentives, product liability and regulation. more


It’s important to understand when people stop working and start relying on their retirement savings. That’s now later in 21 richer countries than in the 1990s: the decades-long declines have been reversed. Participation rates are also higher. more


A 2008 report gives a six-country comparison of older women’s assets and incomes. Incomes are below the local household medians but wealth is typically higher. Cross-national comparisons are not easy but women in the US seem particularly income-poor. more


Australia’s tax system has been extensively analysed. Retirement incomes and saving incentives/compulsion are an important part of the mix. State benefits are a negative tax so they are also addressed. The report endorses the basic framework of the current retirement income system but says that income tests need tightening. more


How much of the run-up in US house prices to 2005 might have been available to improve the retirement incomes of older homeowners? In theory, quite a bit but the trouble is not many seemed keen to take advantage of their higher equity. more


The US Social Security Administration collects information about the aged (65+). The latest (2008 data) looks at all types of income. Median real income has risen over the years – marital status and age are still significant qualifiers. Poverty levels have grown slightly in recent years. more


Contrary to an earlier report, auto-enrolment into 401(k) schemes in the US does not mean lower average employer contributions. Based on a survey of large employers, it seems that auto-enrolment might be making them more generous; but might not. more


A 2000 report suggests that US Social Security is less redistributive than many suppose. However, families are somewhat favoured over singles along with serial divorcées. It is unclear why the government might want to redistribute taxes in those ways. more


Ukraine recently carried out a ‘natural experiment’ when it upped its nearly universal, minimum pensions by 250%. Pension-aged poverty was eliminated, at the cost of a 2.4% reduction in the size of the labour force. Is that a reasonable price to pay? more


In the context of the expected costs of demographic change, some think that because ageing societies need more children, parents should be rewarded in retirement for producing offspring. Current policies lead to “inefficiently low fertility”. Really? more


Many countries in the EU have high proportions of the pensioner population being ‘at risk of poverty’ (using 60% of median incomes as the benchmark). 14 of the 27 countries have even higher rates suffering “material deprivation. Not good enough really. more


Huge internal migration flows in China create social welfare problems. Most migrants are not supposed to be where they are and so lose local social protections. Vesting rules coupled with constant moves to follow jobs will reduce pension costs but increase poverty. more


Financial education is a good thing but default saving and investment options are probably better. They might address persistent ‘mistakes’ made by US citizens. If taxpayers might have to fix ‘mistakes’ then regulators need to be involved. more


Surveys on individuals’ retirement preparations and preferences are often unhelpful because they are framed by the single viewpoint of the survey’s designer. A new ‘multideck’ approach can react to basic preferences. It is tested in three countries: Netherlands, UK and Germany. more


Auto-enrolment into employer-sponsored saving schemes should mean more members and a higher cost for employers. That could reduce the average amount spent on each member. US evidence seems to support that; other US evidence might conclude otherwise. more


In the UK, moving to a lower ‘taper rate’ for income-tested retirement income supplements need not, it seems, increase government spending. That’s partly because of behavioural responses by affected citizens. more


The US can draw lessons from the experiences of Chile and Sweden when it thinks of replacing the current Defined Benefit state schemes. The answer is that the US could adopt Defined Contribution but should it? Probably not. more


Financial modelling software can help individuals plan for their retirement income needs. Web-based versions in the US are greatly simplified (perhaps even simplistic) and will probably improve. They need to if they are to allow for expected and also extreme events like the global economic crisis. more


US individuals are very ‘mobile’ with respect to their incomes. Over the 10 years to 2005, about half from the bottom income quintile moved to a higher one: broadly unchanged over the preceding 10 years. Care is needed when income analyses are made. more


Well-run pension schemes require good record keeping. That should be particularly the case with government-run pension schemes: not so recently in Japan as the discovery of 50 million ‘floating’ pension records attests. more


In 2004, the Australian government introduced new rules designed to improve the governance of superannuation schemes, including the compulsory Tier 2 schemes. Who were the winners? Financial service providers. And the likely losers? Members. more


A new ‘Global Pension Index’ grades different countries’ retirement income systems – public and private – from “poor” to “first class and robust”. Eleven countries are covered in the first pass. It is unclear what might be done with the results; perhaps ‘Could do better if tried’? more


Australia’s retirement income system will produce post-retirement replacement rates of 80% plus for home-owning, low income earners. Middle and high earners will be less well off as will those who do not own their homes. Time for them to do more. Really? more


In the US, reduced Defined Benefit coverage will affect the make-up of the baby boomers’ retirement incomes. The highest earners will see the biggest falls, particularly younger boomers. From a public policy perspective, that’s not necessarily a bad thing. more


When state pensions are based on retirees’ work/income experiences, as is the case in the US, we must expect the value of those pensions to vary by working life differences. So it turns out. Whether that should be so is another issue. more


The EU fund management industry needs to step up – better governance and fee disclosure are essential. Better regulation would help, recognising the special place that long-term savings vehicles should apparently have. Everyone needs more financial education and better advice. more


In the UK, housing is 40% of household’s wealth but 20% of those age 50+ have no housing assets. Some housing wealth might be accessed to help with retirement income but ‘equity release’ products have an image problem. DIY equity release might be more likely. more


‘Equity release’ financial products let the retiree-owners of assets draw down on them without having to sell. An Australian government report looks at the main types and issues some warnings. Bad decisions can be permanent and financially disastrous. more


The workforce is ageing in different ways. A New Zealand study shows the age and gender shapes of 37 occupations. Women tend to dominate the professions at younger (but not older) ages. Younger workers dominate some occupations. Employers will need to be smarter. more


A 2007 survey of older New Zealanders (aged 65-84) showed that 88% feel satisfied with their lives. Health, income, partner status and home ownership seem the top four indicators. Much is as might be expected. more


When countries get richer, fertility rates generally decline. But when countries get really rich, fertility rates seem mostly to rise off their lows. So, are predictions of demographic doom alarmist? more


The OECD has looked at countries’ complex rules governing funding requirements in Defined Benefit schemes. There is no easy overall solution and so perhaps it’s all too hard. Anyway, employers probably need to stop the DB schemes they have. more


Europe has a big problem – too many old people live in poverty because their countries seem to be failing them. So, should Europe solve the problem rather than leave it to each country? There are some advantages but also quite a few problems; probably too many problems. more


Changing the State Pension Age should provoke a review of other age-based aspects of social welfare. In the US, Social Security pensions can be claimed from age 62. As the State Pension Age rises to 67, should age 62 become 64? The answer isn’t simple. more


The UK government has published a report describing proposals to reform “care and support systems for adults”. Buying “insurance” from the government at retirement to secure aged care services is one option. Consultation now follows before the government decides what it wants. more


Austrian workers enjoy a generous (and expensive) Defined Benefit pension scheme. Tier 3 saving schemes are of lesser value, seemingly because of their ‘riskier’ Defined Contribution format. More employer/state support is apparently needed. more


Australia has looked at its retirement income system. Three ‘pillars’, supported by tax breaks are good but can be ‘improved’. The State Pension Age should go to 67 and the means-test simplified. Australians need more, better information to help them make saving decisions. more


The OECD thinks that pension assets had fallen by about $US5.4 trillion (20%) by the end of 2008. It looks at how countries have reacted to this. Some changes are a good idea anyway but pension assets seem somehow special. Besides which, there is the other $21.6 trillion. more


The World Bank’s From Red to Gray looks at Eastern Europe’s rapid ageing. Chapter 2 is about the impact of demographic change on labour markets. In short, labour participation rates are generally too low, mainly from the early exit of older workers - not good news for them or for pensioners. more


International comparisons of pensions – public or private – are fraught with difficulties. The OECD has published a first Pensions at a Glance for the Asia/Pacific region. Necessary constraints in the comparison affect the robustness of the results. more


In Australia, financial incentives encourage men’s early retirement but not so much women’s. For them, health and family seem more important influences. The financial incentives strengthen after State Pension Age. Shifting that now might not be effective. more


The private Defined Benefit scheme is a threatened species. The global financial crisis will not have improved its survival. In the UK, a more immediate threat is the 2012 arrival of Personal Accounts. DB schemes will change but how? more


The World Bank has studied the implications of Eastern Europe’s rapid ageing. Each chapter of the book is separately downloadable and will be separately reviewed. Chapter 1 examines the demographics – later chapters cover labour markets, savings, pensions, healthcare and education. more


In former times, having more children usually meant increased financial security in old age. That still seems to apply in less developed countries. Better pension systems and more developed capital markets have seemingly undermined this relationship in developed countries. But is this simply correlation rather than causation? more


It seems that too many Canadians are under-saving for retirement despite significant government involvement at Tiers 1, 2 and 3. The proposed answer is a ‘Canada Supplementary Pension Plan’ modelled on the UK’s ‘Personal Accounts’. more


‘Social investing’ sounds like a good idea – that is, until we have to know precisely what that means. Even if we can know that, is it always a ‘good thing’? Not necessarily. Should matters be left to governments rather than trustees? Yes, certainly in the US. more


Here is what US 401(k) plans looked like in 2006, before the global financial crisis. The median balance was $US66,650, about two-thirds of which was in shares (unchanged for about 11 years). The last two years’ events will have changed everything. more


Behavioural economics seems to offer guidance leading only to winners without losers but the mistakes of proxy decision-makers replace those of decision-makers. The further proxies are from the decisions, the larger those mistakes are likely to be. more


How well are US households saving for retirement? Mostly well enough according to a report that uses lifetime (rather than current) incomes as the measure. Only 25% of households (at the bottom end) are saving less than a model predicts they should. more


Samoa’s existing social security arrangements are reviewed in detail by the International Labour Organisation. A ‘sourcebook’ gives data on all aspects of what happens now and policy options based on the ‘gaps’ identified. The universal Tier 1 pension gets a tick. more


In the US, younger and older consumers make mistakes about the use of financial services that mean they end up paying more than they need to. Financial sophistication tends to improve to middle age and then decline. more


Sri Lanka can afford a universal pension despite its relative poverty and undeveloped financial framework. The State Pension Age and annual pension are the key variables. The same logic applies to rich and poor countries alike. more


Behavioural economics may help to explain why people behave as they do. It may also help employers and suppliers frame employees’/consumers’ choices. Moving choice into the framing of public policy is another step. more


Studies of members’ investment decisions in Defined Contribution schemes show the impact of the way options are framed. In Australia (with a compulsory Tier 2 environment), younger members tend to respond as expected. Older members seemed prepared to take greater risks. more


Japan used to be a poster child for household thrift though perhaps not for the uses to which its savings have been put. The household saving rate will soon be negative, driven by ageing. PAYG state pensions are also contributing to that downward pressure. more


In theory, the equity in the family home offers financial security that can be converted to cash if needed. In the US, it seems that older workers will not want to use the equity for living costs but rather as insurance or for a bequest. more


The US faces a number of alternatives when it addresses Social Security reform. The right questions need to be asked and all the implications of change considered (including cost). Some suggested solutions won’t change much and may be harmful. more


The casual observer might think Mexico was switching from a PAYG pension to a prefunded replacement. Not so. In fact, Mexico now has an elaborate money-go-round that means tomorrow’s pensioners are still dependent on tomorrow’s taxpayers. more


An international agency calls for a universal “social pension” – a non-contributory, universal Tier 1 pension from age 60. In poorer countries, that helps the old but also helps society, governance and need not cost a lot. more


In a country as large as China, pension experiments can be local – perhaps need to be local. Baoji City is trying a contributory, Tier 1 pension that, for the currently old, depends on the children’s decision to contribute. Poverty alleviation is the scheme’s modest target. more


Individuals need information to make ‘sensible’ decisions about retirement saving. Global, generic information (including ‘financial literacy’) seems less useful than help from specialist advisers. This has implications for disclosure requirements (and public information campaigns). more


Most retired Canadians seem happier in retirement than before and more (or at least as) satisfied with their financial position. Life satisfaction tended to fall with age but satisfaction with finances rose (compared with pre-retirement). There is no real substitute for asking. more


Surveys of US employers seem to show a mismatch – employers think that older employees will need to work longer (because they can’t afford to retire) but the employers seem reluctant to keep older workers on. more


Australia has again looked at long-term fiscal issues associated with its ageing population. Things look a little better in 2007 than they did in 2002. more


In 2007, the Irish government issued a major report (a ‘Green Paper’) that looked at most aspects of pension provision. Major change was seemingly unlikely, only minor but detailed tweaks. Not good enough, according to some academics. Root and branch change is needed. more


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. more


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. more


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. more


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. more


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. more


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. more


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 scheme’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 3 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 PAYG 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 are 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 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 worry about 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 the pension age seems not to affect retirement incomes in Sweden. A future emphasis on defined contribution may change that, but may not. 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


The privatisation of public pensions is seemingly more about financial and commercial interests rather than the improvement of post-retirement welfare. It’s not really about pensions apparently. more


Lifetime transfer calculations paint a reasonably encouraging picture in Canada. However, indexing pensions to prices rather than wages slants the analysis. 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


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 is now running for President and promises to extend the programme to all Mexicans. more


The World Bank’s 1994 Averting the Crisis has been re-visited and a five pillar system seems better than the previous three pillars. The 2005 review is surprisingly uncurious on some key issues such as whether compulsion or tax breaks actually work. more