Pension Reforms : key issues illustrated with an actuarial model by (original) (raw)
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Pension Reforms: An Illustrated Basic Analysis
CESifo Economic Studies, 2004
The paper examines pension reforms under population ageing. The concepts of "implicit pension debt", "implicit tax" and "internal rate of return" are first introduced with the help of a three-period model. Using stylised facts, ageing is traced to low fertility and increasing longevity. Formulating a benchmark for intergenerational fairness leads to a framework for designing pension reforms such that leaving an unfair burden to future generations is avoided. Secondly, a yearly simulation model is used to arrive at the following main results for reform blueprints: (1) In a Defined Benefit (DB) system, partial pre-funding is needed to achieve intergenerational fairness unless benefits are sufficiently reduced; partial privatisation is an option for the management of the accumulating funds. (2) Transition from a DB to a Notional Defined Contribution (NDC) system is another reform option; it reduces the replacement rates to levels which match prescribed contribution rates; an NDC public pillar can be accompanied by a second pillar, managed by the private sector. (3) An effective increase in the retirement age is necessary to moderate the increase in pension expenditure and to preserve adequate pension levels. (4) Pension reforms have important effects on public finance target setting. (JEL H1, H5, H6)
Pension reform: key issues illustrated with an actuarial model
European Economy-Economic Papers, 2002
Downloadable! The paper examines pension reforms under ageing. With stylised facts, ageing is traced to low fertility and increasing longevity. ... The paper examines pension reforms under ageing. With stylised facts, ageing is traced to low fertility and increasing longevity. ...
La réforme des pensions: principes, erreurs analytiques et orientations générales
Revue Internationale de Sécurité Sociale, 2009
This article, based on two books (Barr and Diamond 2008, forthcoming), sets out a series of principles for pension design rooted in economic theory: pension systems have multiple objectives, analysis should consider the pension system as a whole, analysis should be framed in a second-best context, different systems share risks differently, and systems have different effects by generation and by gender. That discussion is reinforced by identification of a series of widespread analytical errors -errors that appear in World Bank work, but by no means only in World Bank work: tunnel vision, improper use of first-best analysis, improper use of steady-state analysis, incomplete analysis of implicit pension debt, incomplete analysis of the impact of funding (including excessive focus on financial flows, failure to consider how funding is generated, and improper focus on the type of asset in trust funds), and ignoring distributional effects.
2014
Pension systems need to be redesigned to accommodate demographic changes. Postponing adjustment simply increases the economic and social costs. The interests of workers (deductions from wages) and retirees (receipt of benefits) differ. Governments need to make pension systems more transparent and make adjustments to reduce the burden on workers, returning the pension system to its social role, which is helping the very old without overburdening the young. Pension solidarity should not be confused with political discretion. Transparency and fairness are the key preconditions when adjusting pension systems for the 21st century. ELEVATOR PITCH
Ageing, retirement and pension reforms
The World Economy, 2003
I T is sometimes said that 'war is too serious a matter to be left to the generals', and it is tempting to paraphrase the saying by asking whether retirement is not also too important a question to be left to economists and politicians. This idea has come to me in recent months, and in response to two surprising changes in received opinion. Faced with difficult stock markets many advocates of funding and privatising pension systems have given up on their proposals-which once seemed so attractive. In the face also of a resurgence of unemployment, some newly converted supporters of raising the age of retirement have also been repossessed by old demons and once again believe-against all the evidencethat inactivity among the older generation contributes to an increase in economic activity among younger workers. These remarks are to remind that the design of a new pensions system as well as the reform of an existing system should not be influenced in their basic features by temporary shocks. Stock market fluctuations and changes in the labour market are all part of normal economic life and must therefore form an integral part of a robust and yet flexible system.
OECD Development Centre Policy Briefs, 1999
In its research activities, the Development Centre aims to identify and analyse problems whose implications will be of concern in the near future to both Member and non-Member countries of the OECD. The conclusions represent a contribution to the search for policies to deal with the issues involved. The Policy Briefs deliver the research findings in a concise and accessible way. This series, with its wide, targeted and rapid distribution, is specifically intended for policy and decision makers in the fields concerned.
SSRN Electronic Journal, 2016
This paper stems from the observation that there are two worldwide trends, pension reform and population ageing, and asks whether the two may be related. Exploring the cases of pension reform in different countries, we find that, although they are very different, the cases share a common characteristic: they shift risks away from workers towards those who are retired. Furthermore, population ageing, by increasing the weight of the elderly relative to working generations, raises the price of intergenerational risk sharing. Combining these findings, we argue and show formally that pension reform can be seen as a welfare-best response to population ageing.
Pension System in the Changing Society
Pénzügyi Szemle = Public Finance Quarterly
In the past three decades, several attempts in various directions have been initiated for reforming the pension system. The reforms are needed to ensure financial viability on the one hand, and to achieve greater justice, on the other hand. Parametric reforms are not enough. A paradigm shift is needed in the pension system! To that end, the insurance paradigm in the state pension system must be replaced with an investment paradigm, and, to be more specific, to the paradigm of investing into human capital. We don't save for our older selves, we repay our predecessors what they invested in us. Our work pensions would be complemented by the second channel payable based on children or based on the voluntary pension fund. The latter should be chosen by those who do not or could not have children. If they do, eventually, have children, they can change to the children-based pension channel. The proposed reform would result in greater justice at all events. It would, however, be a viable step. It could have a significant role in strengthening family solidarity, encouraging having children and the mitigation of demographic problems.
Adequacy and Social Security Principles in Pension Reform
1998
This paper aims at reviewing the role that internationally accepted social security principles could and should play in such major reforms with special reference to pension schemes.Four main factors and trends seem to exert a major influence on the advocated need for and the content of contemporary pension reforms. These are the aging of national populations; a growing interest for privatization, including in the social sphere; the globalization of markets, which brings labour and social costs under close scrutiny; and the growth of the so-called informal sector which leaves unprotected large sections or even the majority of the active population. Pension reforms have been designed to take account of these factors. The first section of this paper provides a typology of these reforms. The second part identifies the major guiding principles which should, at least in the opinion of the ILO, continue to be used as benchmarks for assessing the value of proposed social security reforms, w...