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on Economics of Ageing |
| By: | Grech, Aaron George |
| Abstract: | Spurred by the ageing transition, many governments have made wide-ranging reforms, dramatically changing Europe's pensions landscape. Nevertheless there remain concerns about future costs, while unease about adequacy is growing. This study develops a comprehensive framework to assess pension system sustainability. It captures the effects of reforms on the ability of systems to alleviate poverty and maintain living standards, while setting out how reforms change future costs and relative entitlements for different generations. This framework differs from others, which just look at generosity at the point of retirement, as it uses pension wealth - the value of all transfers during retirement. This captures the impact of both longevity and changes in the value of pensions during retirement. Moreover, rather than focusing only on average earners with full careers, this framework examines individuals at different wage levels, taking account of actual labour market participation. The countries analysed cover 70% of the EU’s population and include examples of all system types. Our estimates indicate that while reforms have decreased generosity significantly, in most, but not all, countries the poverty alleviation function remains strong, particularly where minimum pensions have improved. However, moves to link benefits to contributions have made some systems less progressive, raising adequacy concerns for women and those on low incomes. The consumption smoothing function of state pensions has declined noticeably, suggesting the need for longer working lives or additional private saving for individuals to maintain pre-reform living standards. Despite the reforms, the size of entitlements of future generations should remain similar to that of current generations, in most cases, as the effect of lower annual benefits should be offset by longer retirement. Though reforms have helped address the financial challenge faced by pension systems, in many countries pressures remain strong and further reforms are likely. |
| Keywords: | Social Security and Public Pensions; Retirement; Poverty; Retirement Policies |
| JEL: | H55 I38 J26 |
| Date: | 2010–09 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:27377&r=age |
| By: | Jinkook Lee |
| Abstract: | A growing number of countries are developing or reforming pension and health policies in response to population ageing and to enhance the welfare of their citizens. The adoption of different policies by different countries has resulted in several natural experiments. These offer unusual opportunities to examine the effects of varying policies on health and retirement, individual and family behaviour, and well-being. Realizing these opportunities requires harmonized data-collection efforts. An increasing number of countries have agreed to provide data harmonized with the Health and Retirement Study in the United States. This article discusses these data sets, including their key parameters of pension and health status, research designs, samples, and response rates. It also discusses the opportunities they offer for cross-national studies and their implications for policy evaluation and development. |
| Keywords: | data analysis, comparison, old age risk, health status, quality of life, social policy, demographic aspect, international |
| Date: | 2010–09 |
| URL: | http://d.repec.org/n?u=RePEc:gdm:wpaper:5910&r=age |
| By: | Giuseppe Cappelletti (Bank of Italy); Giovanni Guazzarotti (Bank of Italy) |
| Abstract: | This paper examines the retirement decisions of Italian households using data from the Survey on Household Income and Wealth (SHIW) for 2008. The analysis focuses on the adequacy of pension wealth, knowledge of supplementary retirement rules, the determinants of enrolment decisions and workers’ propensity to convert their wealth into an annuity at retirement. The results indicate that pension wealth is inadequate for a substantial part of the Italian population. Moreover, workers have a poor understanding of the rules of supplementary retirement schemes and little awareness of their pension situation. These results confirm that an improvement in financial education is essential in order to promote retirement saving. The analysis shows, however, that such interventions could be ineffective in the case of workers in lower income classes with little opportunity to increase their savings. |
| Keywords: | supplementary pension funds, occupational pension funds, retirement savings, replacement rate, annuity |
| JEL: | D91 H55 |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:opques:qef_77_10&r=age |
| By: | Torben M. Andersen; Marias H. Gestsson |
| Abstract: | Challenges raised by ageing (increasing longevity) have prompted policy debates featuring policy proposals justified by reference to some notion of intergenerational equity. However, very different policies ranging from pre-savings to indexation of retirement ages have been justified in this way. We develop an overlapping generations model in continuous time which encompasses different generations with different mortality rates and thus longevity. Allowing for trend increases in both longevity and productivity, we address the issue of intergenerational equity under a utilitarian criterion when future generations are better off in terms of both material and non-material well being. Increases in productivity and longevity are shown to have very different implications for intergenerational distribution. |
| Date: | 2010–10 |
| URL: | http://d.repec.org/n?u=RePEc:ice:wpaper:wp52&r=age |
| By: | David E. Bloom (Harvard School of Public Health); Ajay Mahal (Harvard School of Public Health); Larry Rosenberg (Harvard School of Public Health); Jaypee Sevilla (Harvard School of Public Health) |
| Abstract: | The rapid ageing of India's population, in conjunction with migration out of rural areas and the continued concentration of the working population in the informal sector, has highlighted the need for better economic security arrangements for the elderly. Traditional family ties that have been key to ensuring a modicum of such security are beginning to fray, and increased longevity is making care of the elderly more expensive. As a result, the elderly are at increased risk of being poor or falling into poverty. In parallel with its efforts to address this issue, the Government of India and some of the Indian states have initiated an array of programmes for providing some level of access to health care or health insurance to the great majority of Indians who lack sufficient access. Formal-sector workers have greater social security than those in the informal sector, but they only represent a small share of the workforce. Women are particularly vulnerable to economic insecurity. India's experience offers some lessons for other countries. Although there is space for private initiatives in the social security arena, it is clear that most such efforts will need to be tax-financed. The role that private providers can play is substantial, even when most funding comes from public sources, but such activity will face greater challenges as more individuals seek benefits. India has also shown that implementation can often be carried out well by states using central government funds, with a set of advantages and disadvantages that such decentralization brings. Finally, India's experience with implementation can offer guidance on issues such as targeting, the use of information technology in social security systems, and human resource management. |
| Keywords: | old age risk, old age benefit, medical care, social security administration, demographic aspect, India |
| Date: | 2010–09 |
| URL: | http://d.repec.org/n?u=RePEc:gdm:wpaper:6010&r=age |
| By: | Dirk Broeders; An Chen |
| Abstract: | Developed countries apply different security mechanisms in regulation to protect defined pension benefits: solvency requirements, a pension guarantee fund, and sponsor support. We test the performance of these mechanisms in terms of the protection offered to pension benefits in relation to the costs. For this, we calculate the expected log-return for the beneficiaries and the shortfall probability, i.e. the likelihood of the pension payment falling below the promised level. We show that it is possible to compare different pension security mechanisms using appropriate finance tools. Compared to a system based on solvency requirements alone, support by a pension guarantee fund or by the sponsor offers better downside protection for pension funds pursuing an aggressive investment policy. However, this comes at an additional cost. Beneficiaries of pension funds with conservative investment policies are better off under solvency requirements. |
| Keywords: | Pension plans; regulation; barrier options; rainbow barrier options; guarantee systems |
| JEL: | G11 G23 |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:dnb:dnbwpp:268&r=age |
| By: | Hershey, D.A.; Henkens, C.J.I.M. (Tilburg University); Dalen, H.P. van (Tilburg University) |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:ner:tilbur:urn:nbn:nl:ui:12-4425924&r=age |
| By: | Carl-Johan Dalgaard; Holger Strulik |
| Abstract: | This study introduces physiological aging into a simple model of optimal in- tertemporal consumption. In this endeavor we draw on the natural science literature on aging. According to the purposed theory, the speed of the aging process and the time of death are endogenously determined by optimal health investments. At the same time, physiological aspects of the aging process influence optimal savings and health investment. We calibrate the model for the average US male in 2000 and proceed to show that the calibrated model accounts well for the cross-country link between labor productivity and life expectancy in the same year (\the Preston curve"); cross-country income dierences can explain dierences in life expectancy at age 20 of up to a decade. Moreover, techno- logical change in health care of about 1.1% per year can account for the observed shift in the Preston curve between 1980 and 2000.K |
| Keywords: | Aging, Longevity, Health Investments, Savings, Preston Curve |
| Date: | 2010–07 |
| URL: | http://d.repec.org/n?u=RePEc:gdm:wpaper:5810&r=age |
| By: | Pfau, Wade Donald |
| Abstract: | We find evidence that retirees in 2000, in particular, are on course to potentially experience the worst retirement outcomes of any retiree since 1926. This holds for a wide variety of asset allocations and withdrawal rate strategies. Wealth depletion is taking place more rapidly for 2000-era retirees than for retirees who even endured the Great Depression or the stagflation of the 1970s. Though moderate inflation during the past decade has resulted in current withdrawal rates that are a bit less for the 2000 retiree than for some retirees in the 1960s, this is hardly reassuring with further analysis based on the required future asset returns needed for sustainability. Our findings cast doubt as to whether the 4 percent withdrawal rate rule will be sustainable for turn-of-the-century retirees. |
| Keywords: | retirement planning; safe withdrawal rates; sequence of returns risk; retirement ruin; retiring in 2000; current withdrawal rate |
| JEL: | G11 C20 N22 D14 |
| Date: | 2010–11–29 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:27107&r=age |
| By: | David E. Bloom (Harvard School of Public Health); Roddy McKinnon (International Social Security Association) |
| Abstract: | From 29 November to 4 December 2010, the International Social Security Association (ISSA) will meet in Cape Town, Republic of South Africa, to mark the event of the ISSA World Social Security Forum. The Forum provides a unique opportunity for decision-makers from all regions to share knowledge, recognize good practices and discuss key policy challenges as these relate to the design and delivery of national social security programmes. One key policy challenge identified by the ISSA's worldwide membership is demographic change. For this important reason, among the events planned for the Cape Town Forum, a plenary will focus specifically on demography. To coincide with the preparations for the World Forum, and to complement the wider and longer-term endeavours of the ISSA to promote knowledge sharing, the International Social Security Review has chosen to produce this double special issue on "Social security and the challenge of demographic change". The expectation is that this set of papers will make a contribution to supporting social security policy-makers, practitioners, analysts and researchers in all countries as they work towards developing and implementing tailored policy responses to the multifaceted challenge of demographic change. |
| Keywords: | social security, demographic change, demography, policy |
| Date: | 2010–09 |
| URL: | http://d.repec.org/n?u=RePEc:gdm:wpaper:6110&r=age |
| By: | Christian Pfarr; Udo Schneider |
| Abstract: | In 2001, the voluntary additional Riester pension scheme was implemented in Germany. Financial subsidies should incentivize people to increase their private pension savings. In this paper, we hypothesize that these publicly subsidized savings mainly replace existing not subsidized savings and that supplier induced demand is an important factor. Using data from the Socio-economic Panel we analyze the key determinants in the choice of a Riesterpension. We find greater participation of those who already have life insurance or other public subsidized savings. Furthermore, we show that a contact with an insurance agent in the previous year is a major factor for the possession of a Riester-pension. |
| Keywords: | Riester-Rente, Demografie, angebotsinduzierte Nachfrage, Mitnahmeeffekt |
| JEL: | D12 H31 I38 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwsop:diw_sp341&r=age |
| By: | Larry E. Jones; Alice Schoonbroodt |
| Abstract: | Economic demographers have long analyzed fertility cycles. This paper builds a foundation for these cycles in a model of fertility choice with dynastic altruism and aggregate shocks. It is shown that under reasonable parameter values, fertility is pro-cyclical and that, following a shock, fertility continues to cycle endogenously as subsequent cohorts enter retirement. Quantitatively, in the model, the Great Depression generates a large baby bust -- between 38% and 63% of that seen in the U.S. in the 1930s -- which is subsequently followed by a baby boom -- between 53% and 92% of that seen in the U.S. in the 1950s. |
| JEL: | E13 J11 J13 O11 |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:16596&r=age |
| By: | Bonsang Eric; Soest Arthur van (METEOR) |
| Abstract: | Using data on individuals of age 50 and older from 11 European countries, we analyze two economic aspects of subjective well-being of older Europeans: satisfaction with household income, and job satisfaction. Both have been shown to contribute substantially to overall well-being (satisfaction with life or happiness). We use anchoring vignettes to correct for potential differences in response scales across countries. The results highlight a large variation in self-reported income satisfaction, which is partly explained by differences in response scales. When differences in response scales are eliminated, the cross country differences are quite well in line with differences in an objective measure of purchasing power of household income. There are common features in the response scale differences in job satisfaction and income satisfaction. French respondents tend to be critical in both assessments, while Danish and Dutch respondents are always on the optimistic end of the spectrum. Moreover, correcting for response scale differences decreases the cross-country association between satisfaction with income and job satisfaction among workers. |
| Keywords: | labour economics ; |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:umamet:2010059&r=age |