scholarly journals Inequalities and poverty risks in old age across Europe: The double‐edged income effect of pension systems

2021 ◽  
Author(s):  
Bernhard Ebbinghaus
Keyword(s):  
Old Age ◽  
Income Effect ◽  
Pension Systems

Old Age Pensions

2018 ◽  
Author(s):  
Pierre Pestieau ◽  
Mathieu Lefebvre
Keyword(s):  
Old Age ◽  
Pension System ◽  
Labour Force ◽  
Labour Force Participation ◽  
Population Ageing ◽  
Pension Systems ◽  
Demographic Challenges ◽  
Old Age Poverty ◽  
Future Outcomes ◽  
Social Security Benefits

This chapter gives an overview of the type of pension system existing in Europe. Contributive and redistributive systems are opposed but the chapter shows that pension systems are more often a mix of both. The chapter shows how these systems have been more or less effective in tackling old age poverty in most countries and it points to the main challenges that these systems are facing, namely population ageing and low labour-force participation. The major reforms that have been implemented to ensure future sustainability of pension systems are presented but a number of additional changes that should be implemented are discussed. The chapter also presents projections for future outcomes and the link between demographic challenges and social security benefits is highlighted.

scholarly journals Annuity Markets and Capital Accumulation

2019 ◽  
Vol 20 (1) ◽  
Author(s):  
Shantanu Bagchi ◽  
James A. Feigenbaum
Keyword(s):  
Old Age ◽  
Capital Stock ◽  
Early Life ◽  
Capital Accumulation ◽  
Substitution Effect ◽  
Income Effect ◽  
Substitution Effects ◽  
Income Effects ◽  
Annuity Markets ◽  
The One

AbstractWe examine how the absence of annuities in financial markets affects capital accumulation in a two-period overlapping generations model. Our findings indicate that the effect on capital is ambiguous in general equilibrium, because there are two competing mechanisms at work. On the one hand, the absence of annuities increases the price of old-age consumption relative to the price of early-life consumption. This induces a substitution effect that reduces saving and capital, and an income effect that has the opposite effect as households want to consume less when young, causing them to save more. On the other hand, accidental bequests originate from the assets of the deceased under missing annuity markets. The bequest received in early life always has a positive income effect on saving, but the bequest received in old age, conditional on survival, is effectively a partial annuity with both substitution and income effects. We find that when the desire to smooth consumption is high, the income effects dominate, so the capital stock always increases when annuity markets are missing. However, when the desire to smooth consumption is low, the substitution effects dominate, and the capital stock decreases with missing annuity markets.

The transition to a multi-pillar pension system: the inherent socio-economic anomaly

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Ishay Wolf ◽  
Jose Maria Caridad y Ocerin
Keyword(s):  
Income Inequality ◽  
Old Age ◽  
Pension System ◽  
Economic Loss ◽  
Pension Scheme ◽  
Total Contribution ◽  
Content Type ◽  
Pension Systems ◽  
High Earning ◽  
Minimum Pension

Purpose This paper aims to analytically show that in an over-lapping-generation (OLG) model, low earning cohorts bear unwanted risk and absorb higher economic cost than high earning cohorts do. Design/methodology/approach This paper aims to consider the individual's risk appetite, using a simple utility function, based on consumptions and discount rates in each period. This paper calibrates the model according to teh Israeli pension system as a representative of a small open developed organization for economic cooperation and development country. Israel is considered as unique case study in the pension landscape, as it implements almost pure defined contribution pension scheme with continuous trend of pension market capitalization (Giorno and Jacques, 2016). Hence, this study finds Israel suitable for examining the theoretical mix of pension scheme. That model enables exploring combined solutions for adequate old age benefits, involving the first and the second pension pillars, under fiscal constraints. Findings It comes out that for risk-averse individuals, the optimal degree of funding is negatively correlated to asset returns' volatility and positively correlated to earning decile level. The neglect of risk and individual's current earning level will thus overstate the contribution level and funded percentage from total contributions. Moreover, even in an economy with minimum government intervention, and highly developed private pension fund with high average of rate of return, the authors find it is optimal that the pension system contains a sizeable unfunded pillar. This paper innovates by revealing a socio-economic anomaly in design of mix pension systems in favor of high earning cohorts on the expense of economic loss of low earning cohorts. Practical implications The model presented in this paper could be implemented in countries with mix pension systems, as an alternative to public social transfers or means tested, alleviating poverty and inequality in old age. Additionally, this model could raise the public awareness of the financial sustainability of the unfunded pay-as-you-go pillar to diversify financial risk in pension systems, especially for low earning cohort in society. Social implications One area of research that is particularly relevant in this context concerns the issue of alleviating poverty and income inequality. It is often stressed that the prevention of old age poverty is among the central targets of well-designed pension system (Holzmann and Hinz, 2005). The conceptualization of minimum pension guarantee used in this composition allows to clearly capturing the notion of such a poverty and social targets as an integral part of the pension system rolls. Originality/value This paper innovates by revealing a socio-economic anomaly in design of mix pension systems in favor of high earning cohorts on the expense of economic loss of low earning cohorts. That comes to realize through the level of total contribution rates and funded share that are generally optimal for high earning cohorts but not for low earning cohorts. This paper identifies that the effect of anomaly is most significant in a market characterized with high income-inequality level. This paper finds that imposing intra-generational risk sharing instrument in the form of minimum pension guarantee can re-balance pension design among different earning cohorts. This solution demonstrates balancing effect on the entire economy.

scholarly journals Active Aging Policies between Individual Needs and Collective Goods. A Study of Active Aging Policies and Practices in Norway

2014 ◽  
Vol 4 (2) ◽  
pp. 139 ◽  
Author(s):  
Tove Midtsundstad ◽  
Hanne Bogen
Keyword(s):  
Side Effects ◽  
Old Age ◽  
Age Groups ◽  
Working Life ◽  
Economic Incentives ◽  
Active Aging ◽  
Good Practices ◽  
Pension Systems ◽  
Work Related ◽  
Collective Goods

A main objective of European governments is to reduce the number of early retirees, either by reforming pension systems or promoting active aging in working life. The importance of formulating a coherent personnel policy for all age groups is increasingly recognized by employers. However, there is still a lack of knowledge as how to strategically cope with an aging labor force. The aim of this article is to define and discuss a number of challenges arising from workplace-related active aging policies. We in particular discuss how an emphasis on economic incentives and gains (“senior goods”) may give rise to unanticipated side effects for the employers as well as the employees. The article is based on results from two recent studies: one study examining six Norwegian municipalities with seemingly good practices in work-related old age policies, and another examining such policies in eight establishments in four different industries.

Strengthening Market Principles in Welfare Institutions: How Hybrid Pension Systems Impact on Social-risk Spreading

2013 ◽  
Vol 42 (4) ◽  
pp. 665-683 ◽  
Author(s):  
PATRICIA FRERICKS
Keyword(s):  
Old Age ◽  
Social Protection ◽  
Pension System ◽  
Social Risk ◽  
Target Level ◽  
Pension Systems ◽  
The Past ◽  
Welfare Institutions ◽  
Risk Spreading

AbstractIn the past two decades, the question of how pension systems should be designed to offer ‘adequate and sustainable pensions for all’ has been raised. As a result, European pension systems, in which market principles in general have played a marginal or even negligible role in the past, were redesigned, with market-based pensions becoming part of the pension calculation norm, i.e. the institutionalised and nationally defined target level for old-age protection. However, since the hybrid pension systems are institutionalised very differently, pension systems’ ingredients, characteristics and nexus are far from being homogeneous, and the role of market principles in hybrid systems differs. These differences significantly determine the degree of social protection of the various social citizens and the number of future pensioners with adequate pensions. An illustrative comparison of the contrasting Dutch and German institutional setups indicates differences in the manner in which market principles have been strengthened in the pension system, and the related effects these differences have on social-risk spreading.

Konstitutionenökonomische Bewertung eines Systemwechsels im deutschen Rentenversicherungssystem

2004 ◽  
Vol 53 (3) ◽  
Author(s):  
Vera Streibel
Keyword(s):  
Old Age ◽  
Common Sense ◽  
Pension System ◽  
Economic Justice ◽  
Point Of View ◽  
Public Pension ◽  
Constitutional Economics ◽  
Veil Of Ignorance ◽  
Pension Systems ◽  
Public Pension System

AbstractMany Economists have pointed out that capital-funded pension systems are superior to pay-as-you-go-financed systems of old-age insurance; different proposals for reforming the German pay-as-you-go pension system have been presented. Although the necessity of a fundamental reform is almost common sense, consequent changes are regularly rejected by referring to lacks of economic justice. This paper analyses, what kind of reform serves justice from a constitutional economics point of view. Criteria are developed, which individuals behind a veil of ignorance would agree on and which therefore should be met by any reform proposal. Using these criteria, three prominent proposals for reforming the German public pension system are analysed.

scholarly journals Theoretical Old-Age Pension Benefits and Replacement Rates in the Baltic States: A Retrospective Simulation

2016 ◽  
Vol 28 (1) ◽  
pp. 13-19 ◽  
Author(s):  
Olga Rajevska
Keyword(s):  
Comparative Analysis ◽  
Old Age ◽  
Pension Plan ◽  
Average Salary ◽  
Baltic States ◽  
Pension Systems ◽  
Low Degree ◽  
Baseline Case ◽  
The Baltic ◽  
Pension Benefits

Abstract The author presents a comparative analysis of old-age pension systems in Estonia, Latvia and Lithuania using a method of retrospective simulation run on a self-developed model. The model baseline case is a person retiring in December 2014 after 40 years of service with nationwide average salary. Other cases include low and high-earners, funded schemes participants and simulations for modified notional capital valorisation formulae. Three study countries return very dissimilar results, which is caused by differences in their pension systems’ designs. Lack of non-contributory element (basic pension) in Latvia leads to a low degree of progressivity, with inexcusably low pensions to low-earners and excessively generous pensions to high-earners. Participation in funded pillar II schemes has not brought any significant gains to pension plan sharers. Notional capital valorisation rules adopted in different countries that use the NDC-system significantly influence pension amount.

scholarly journals Public–private pension mixes in East Asia: institutional diversity and policy implications for old-age security

2018 ◽  
Vol 40 (3) ◽  
pp. 604-625 ◽  
Author(s):  
Chung-Yang Yeh ◽  
Hyunwook Cheng ◽  
Shih-Jiunn Shi
Keyword(s):  
Hong Kong ◽  
Old Age ◽  
Pension System ◽  
East Asian ◽  
Policy Implications ◽  
Private Pension ◽  
Institutional Characteristics ◽  
Private Pensions ◽  
Pension Systems ◽  
Old Age Security

AbstractPrevious studies of East Asian welfare regimes focus on similarities between social security schemes. In contrast, this paper explores cross-national variations in public–private pension mixes in six welfare states: China, Hong Kong, Japan, Singapore, South Korea and Taiwan. Our research echoes the pension policy analysis of international organisations but takes a step forward with emphasis on the historical and institutional characteristics of the respective pension systems. The analysis identifies three institutional patterns. First, the statist pension system (Taiwan and China) primarily relies on public pensions to provide old-age security, with private pensions playing a rather minor role. Second, in the dualist pension system (Japan and Korea) both public and private pensions work in parallel to ensure retirement income, though a clear security gap exists between workers in the formal and informal economies. Finally, the individualist pension system (Hong Kong and Singapore) is characterised by genuine fully funded individual accounts, emphasising citizens’ own responsibilities for ensuring old-age security. These three types of pension systems demonstrate distinct institutional characteristics and policy outcomes, illustrated by the juxtaposition of their institutional structures as well as by the comparison of key indicators collected from government reports and Organisation for Economic Co-operation and Development statistics. The paper concludes with a theoretical reflection of East Asian pension policies and a diagnosis of the distinct challenges confronted by each of the various pension patterns.

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