scholarly journals Pension and Active Ageing: Lessons Learned from Civil Servants in Indonesia

2021 ◽  
Vol 10 (11) ◽  
pp. 436
Author(s):  
Aris Ananta ◽  
Ahmad Irsan A. Moeis ◽  
Hendro Try Widianto ◽  
Heri Yulianto ◽  
Evi Nurvidya Arifin
Keyword(s):  
Old Age ◽  
Pension System ◽  
Simulation Method ◽  
Lessons Learned ◽  
Civil Servants ◽  
Active Ageing ◽  
Ageing Population ◽  
Defined Benefit ◽  
Defined Contribution ◽  
State Budget

Many developing countries are currently facing an ageing population without sufficient preparation for old-age financial adequacy, an important component in active ageing. One question is whether a pension system can create old-age financial adequacy. At the same time, many countries are shifting their pension systems from a defined benefit to a defined contribution pension system to improve the welfare of older people while maintaining state budget sustainability. Indonesia is not an exception. This paper learns from civil servants in Indonesia, where the retirement payout from the existing pay-as-you-go, defined benefit system is meagre. The system is to be transformed into a defined contribution one. Using a simulation method, this paper examines whether the proposed system will provide a better retirement payout, which is higher than the minimum wage and will allow retirees to maintain their pre-retirement income. This paper concludes that the proposed system alone is not sufficient to create old-age financial adequacy and, therefore, is less able to contribute to active ageing. To improve the retirement payout, among other things, the retirement age should be raised and made optional, and the accumulated savings should be re-invested during the retirement period.

Pension Reforms in India: Unresolved Issues and Policy Choices

2003 ◽  
Vol 28 (1) ◽  
pp. 11-26 ◽  
Author(s):  
Ramesh Gupta
Keyword(s):  
Pension System ◽  
Pension Reform ◽  
Policy Issue ◽  
Safety Net ◽  
Ageing Population ◽  
Defined Benefit ◽  
Defined Contribution ◽  
Indian Government ◽  
Tax Subsidy ◽  
The Government

Ageing populations with increased life expectancy, low mortality rates, and decreasing and volatile returns in financial markets have made old age financial security difficult. Further, escalating costs of the pension system are forcing the Indian government to re- evaluate its programmes providing social security to its employees. The government has so far received three official reports (namely, OASIS, IRDA, and Bhattacharya) which have examined the issue and suggested several measures to provide a safety net to the ageing population. This paper examines the recommendations made in these reports and analyses the potential effects of them. It is organized around five policy questions: Should the reformed system create individual (funded defined-contribution) accounts or should it remain a single collective fund with a defined-benefit formula? The policy issue is who bears the risk - individual or society collectively. If individual accounts are adopted, should public or private agencies administer the reformed system? The issues that need to be resolved are: the magnitude of intermediation costs, agency problem (principal-agent fiduciary relationship), and the costs to administer the plan. Should fund managers of retirement savings be allowed to invest in a diversified portfolio that includes shares and private bonds? Equity markets are highly volatile and go through long periods of feasts and famine. Guarantees need to be provided in the form of minimum return or providing minimum basic pension on retirement and the bearer of these conjectural liabilities needs to be decided. What should be the level of government fiscal support in the form of tax subsidy, foregone tax collections, grants, administrative costs incurred by its agencies, and level of assumed contingent liabilities in case the government guarantees minimum pension? The crucial question is: how much and to whom is this subsidy accruing? Should the government move toward advance funding of its pension obligations for its employees or should these obligations continue to be financed on pay-as-you-go basis? The present problem in the government pension system is due to successive governments behaving like Santa Clauses ignoring the cost to the exchequer. Mere privatization would not be able to solve these problems. An all-embracing pension reform is not possible overnight. Efforts should be made to find ways of supporting new systems that may supplement existing systems. Suggested measures include: A tax-financed and means-tested system for lower income groups. To build second pillar, continue publicly managed public system for people earning less than Rs 6,500 a month; and for others who can bear the risk, appoint an independent regulator to help develop and supervise private sector in offering risk- return efficient pension products with tax subsidy already available under Section B0CCC. There is no moral justification in India for providing tax benefits to privileged groups to build third pillar. Government should refrain from frequent tinkering of tax laws to benefit a few. This paper also suggests specific fiscal and other measures for implementing a feasible and viable pension system in lndian conditions. For the present, the least that the government can do is to appoint an independent regulator who would also act as developer and make EPFO an independent agency having professional experts on its board.

scholarly journals Contribution volatility and public pension reform

2017 ◽  
Vol 17 (4) ◽  
pp. 513-533 ◽  
Author(s):  
TRAVIS ST. CLAIR ◽  
JUAN PABLO MARTINEZ GUZMAN
Keyword(s):  
Local Governments ◽  
Pension System ◽  
Pension Reform ◽  
Pension Plans ◽  
Fiscal Sustainability ◽  
Economic Downturn ◽  
Defined Benefit ◽  
Defined Contribution ◽  
Unfunded Liabilities

AbstractIn the wake of the economic downturn of 2008–2009, researchers and policymakers have focused considerable attention on the extent of unfunded liabilities in US public sector pension plans and the implications for the long term fiscal sustainability of state and local governments. In response to the growth in liabilities, many states have introduced legislation that cuts back on defined benefit (DB) plan commitments, in some cases even shifting the pension system from a DB to a defined contribution or hybrid plan. This paper explores the factors that have led states to engage in pension reform, focusing particular attention on one factor that has only recently gained attention in the research literature: contribution volatility. While unfunded liabilities have significant long-term solvency implications, in the short term fluctuations in the amount of required contributions pose substantial difficulties for the ability of plan sponsors to balance budgets and engage in strategic planning. We begin by quantifying the volatility in the required contributions US states were expected to make between 2001 and 2013 and comparing the volatility of pension spending to other relevant tax and spending measures. Next, we describe the various types of pension reforms that states have implemented and examine the fiscal pressures facing those states that have engaged in reform. States with greater fluctuations in their required payments have been more likely to reduce benefits and increase employee contributions; they have also been more likely to institute these reforms sooner.

scholarly journals Informality and the Challenge of Pension Adequacy

2019 ◽  
Vol 19 (149) ◽  
pp. 1
Author(s):  
Christoph Freudenberg ◽  
Frederik Toscani
Keyword(s):  
Pension System ◽  
Pension Reform ◽  
Positive Impact ◽  
Defined Benefit ◽  
Defined Contribution ◽  
Real Rate ◽  
Labor Market Reform ◽  
The Impact ◽  
Term Labor ◽  
Pension Adequacy

Past reforms have put the Peruvian pension system on a largely fiscally sustainable path, but the system faces important challenges in providing adequate pension levels for a large share of the population. Using administrative microdata at the affiliate level, we project replacement rates in the defined benefit (DB) and defined contribution (DC) pillars over the next 30 years and simulate the impact of various reform scenarios on the average level and distribution of pensions. In the DB pillar, the regressive minimum contribution period should be re-thought, while in the DC pillar a broadening of the contribution base and/or an increase in contribution rates would help increase replacement rates relative to the baseline forecast of 25-33 percent. A higher net real rate of return than assumed in the baseline would also have a significant positive impact. In the medium-term, labor market reform to tackle informality, and a broad pension reform to restructure the system and avoid competition between the DB and DC pillars should be a priority. Given low pension coverage, having a strong non-contributory pillar will remain important for the foreseeable future.

scholarly journals THE PENSION SYSTEM REFORM IN GEORGIA: ACHIEVEMENTS AND CHALLENGES

2018 ◽  
pp. 153-158
Author(s):  
MIRZA KHIDASHELI ◽  
NIKOLOZ CHIKHLADZE
Keyword(s):  
Young People ◽  
Old Age ◽  
Pension System ◽  
Total Duration ◽  
The State ◽  
Pension Scheme ◽  
System Reform ◽  
Replacement Rate ◽  
State Budget

The study showed that reform is effective for young people, whose total duration of participation in the pension scheme is 40 years. In this case, the pension scheme provides a high replacement rate, which is not possible for persons whose participation in the pension scheme is not more than 20 years. An obstacle remains the pressure of the pension system on the State budget. Despite the establishment of a funded pension system, the old-age pension still remains accessible to participants of the scheme, which, as noted by the authors of the reform, by 2030, will have a significant share in the structure of the State budget spending.

scholarly journals The transition to NDC in Italy: assessing distributive and financial effects

2021 ◽  
pp. 1-16
Author(s):  
Carlo Mazzaferro
Keyword(s):  
Net Present Value ◽  
Pension System ◽  
Pension Scheme ◽  
Defined Benefit ◽  
Defined Contribution ◽  
Ratio Distribution ◽  
Actuarial Fairness ◽  
Notional Defined Contribution ◽  
High Level ◽  
Pension Benefits

Abstract Moving from a Defined Benefit (DB) to a Notional Defined Contribution (NDC) pension formula creates significant re-distributive effects. We estimate the amount and the intensity of these effects in the case of the Italian transition to NDC, which began in 1995. Based on administrative data of the main Italian pension scheme (FPLD), we study the evolution of yearly inequality within old-age pension benefits. Furthermore, we study the adequacy and the actuarial fairness of the pension system, by estimating the replacement rates and the Net Present Value Ratio distribution for workers who retired in the period 1996–2019. Our results show that the very generous interpretation of acquired rights determined by the 1995 reform has contributed to maintaining a high level of adequacy and a significant level of intergenerational imbalance. The financial costs of this imbalance are estimated and its extent is significant.

COVID-19 The Global Pandemic: Learning & Take Out for National Pension System (NPS)

2021 ◽  
Vol 4 (i) ◽  
Keyword(s):  
New York ◽  
Pension Fund ◽  
Pension System ◽  
Stock Exchange ◽  
Stock Exchanges ◽  
Security Market ◽  
Defined Benefit ◽  
Defined Contribution ◽  
Economic Activities ◽  
Fund Managers

The SARS Cov-2 (Covid 19) pandemic has shaken the whole world; it has brought the business, education, industry, transport, communications, travel, hospitality almost all the economic activities to a standstill. Accordingly, it has adversely affected the financial markets and stock exchanges across the globe. The stock exchanges, may it be New York Stock Exchange, Dow Jones, London Stock Exchange, Nikkei, Bombay Stock Exchange or National Stock Exchange experienced an unprecedented plunge of 40 to 50% in a period few weeks. This new dynamic of volatility possesses serious questions about the market driven National Pension System (NPS) which endeavor to ensure smooth retirement life for Indian elderly. The volatility in security market will significantly impact the fund managers’ performance and accordingly the retirement benefit of the subscriber. This article has investigated the impacts of pandemic on fund manager’s risk returns profile. We have used three industry standard risk-adjusted returns parameters such as Sharpe ratio, Treynor Ratio and Jensen’s alpha to evaluate the performance of NPS pension fund managers selected under study. The study has also explored the learning from such unexpected crisis for the policy makers for future preparedness. On the basis of finding, it has suggested some measures for long run sustainability of schemes under NPS. Keywords : NPS, PFRDA, Defined benefit, Defined contribution, Pension fund managers, Risk adjusted returns, COVID-19.

The Impact of the Economic and Financial Crisis on the Polish Pension System

2011 ◽  
Vol 57 (3) ◽  
pp. 267-286 ◽  
Author(s):  
Stanisława Golinowska ◽  
Maciej Żukowski
Keyword(s):  
Financial Crisis ◽  
Global Financial Crisis ◽  
Pension System ◽  
Transitional Period ◽  
Defined Benefit ◽  
Defined Contribution ◽  
Retirement Pension ◽  
Radical Reform ◽  
The Global Financial Crisis ◽  
The Impact

In 1999, Poland introduced a radical reform of its retirement pension system. That reform rested on replacing a portion of the pay-as-you-go scheme with a fully funded capital scheme, as well as on withdrawing from a defined-benefit pension formula in favour of equivalent solutions via the introduction of a defined-contribution pension formula. When, in 2008, the global financial crisis disrupted financial markets, the rate of returns on investments from pension funds dropped dramatically. Moreover, the difficult state of public finances started to encumber the further financing of the reform’s transitional period. This brought about a discussion on “reforming the reform” in Poland and led to a reduction of the contribution rate to the funded pillar from 7.3% to 2.3% beginning in May 2011. The recent debate has both touched on and highlighted a range of issues which had not been aired to date.

GROWTH, PENSIONS, AND THE AGING JONESES

2011 ◽  
Vol 16 (1) ◽  
pp. 35-60 ◽  
Author(s):  
Walter H. Fisher ◽  
Ben J. Heijdra
Keyword(s):  
Economic Growth ◽  
Growth Rate ◽  
Pension System ◽  
Pension Reform ◽  
Mortality Rates ◽  
Defined Benefit ◽  
Defined Contribution ◽  
Pension Policy ◽  
Balanced Growth

We incorporate keeping-up-with-the-Joneses (KUJ) preferences into the Blanchard–Yaari framework and develop a model of balanced growth. In this context we investigate status preference, demographic shocks, and pension policy. We find that a higher degree of KUJ lowers economic growth, whereas, in contrast, a decrease in the fertility and mortality rates increase it. In the second part of the paper we extend the model by incorporating a pay-as-you-go (PAYG) pension system with a statutory retirement date. The latter implies that the growth rate is higher under PAYG. We also consider the implications of pension reform under both defined benefit and defined contribution schemes.

ANALYZING THE EFFICIENCY OF PENSION REFORM: THE ROLE OF THE WELFARE EFFECTS OF FISCAL CLOSURES

2016 ◽  
Vol 21 (5) ◽  
pp. 1205-1234 ◽  
Author(s):  
Krzysztof Makarski ◽  
Jan Hagemejer ◽  
Joanna Tyrowicz
Keyword(s):  
Pension System ◽  
Pension Reform ◽  
Welfare Effects ◽  
System Reform ◽  
Defined Benefit ◽  
Defined Contribution ◽  
Dc System ◽  
Intergenerational Redistribution ◽  
The Way

Replacing the pay-as-you-go defined benefit (PAYG DB) system with an at least partially funded defined contribution (DC) system generates fiscal costs that need financing. The fiscal closures at hand differ by the channel and the extent of distortions. The main contribution of this paper is a thorough comparison of the welfare effects of the various fiscal closures of the pension system reform. In addition, we decompose the welfare effects to the parts attributable to changing the way pensions are financed (PAYG ⇒ prefunding) and to changing the way pensions are computed (DB ⇒ DC). We show that depending on the fiscal closure, the welfare effects differ substantially for the same pension system reform. The financing of the the pension system gap with public debt allows more intergenerational redistribution.

The minimum pension as an instrument of poverty protection in the defined contribution pension system – an example of Poland*

2013 ◽  
Vol 12 (3) ◽  
pp. 326-350 ◽  
Author(s):  
AGNIESZKA CHŁOŃ-DOMIŃCZAK ◽  
PAWEŁ STRZELECKI
Keyword(s):  
Pension System ◽  
Wage Distribution ◽  
Defined Benefit ◽  
Defined Contribution ◽  
International Labour Organisation ◽  
Working Lives ◽  
The One ◽  
Changing Role ◽  
Minimum Pension

AbstractPension systems' reforms are often related to a shift towards (fully or partially) defined contribution (DC) systems, in which the pension distribution reflects to a larger extent the wage distribution. In addition, relatively shorter working lives of those who have lower earnings increase the risk of receiving lower benefits. The aim of the paper is to present the changing role of a minimum pension as a tool of redistribution in the country that replaced a defined benefit (DB) pension system with a DC pension system. The old system in Poland had a significant income redistribution in the pension formula and the minimum pension was only a tool supporting this redistribution. After the introduction of the new mandatory pension system the main mechanism of redistribution (and a tool of social policy preventing poverty) is the minimum pension, financed from general taxes. According to the current rule of indexation, the minimum pension is expected to fall relative to the average wage in the economy. According to our simulations, the lack of changes of the current indexation method means that the minimum pension will fall below the International Labour Organisation (ILO) standard of the poverty protection of elderly by mid 2020s and in practice the last instrument of the poverty protection of elderly is going to disappear. However, the sole decision to change the indexation mechanism to the one based on full wage can create a significant pressure on public finance and distort incentives for prolonging work as 45% of women would be probably covered by the minimum pension guarantee (MPG). Results of simulations show that a raise and equalization of the retirement age for men and women combined with keeping a constant ratio of the minimum pension to the average (and also minimum) wage in the economy can be considered as a balanced solution that assures no further reduction of poverty protection and effective maintaining of this redistribution instrument.

Sign in / Sign up

Export Citation Format

Share Document