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| By: | P. AUBERT (Secrétariat général du Conseil dorientation des retraites et Insee); S; RABATÉ (PSE et Insee) |
| Abstract: | The 2003 French Pension Reform created a new rule, which implied that the career duration that is legally required for a full retirement pension should increase regularly over cohorts, proportionally to the gains in life expectancy after 60. This rule was explicitly targeting an objective of keeping constant, among all cohorts, the ratio of the length of career on the length of the duration span. In this paper, we simulate the evolution of retirement ages, average career durations and average retirement durations for all cohorts born between 1943 and 1990, in order to empirically assess in what extent this objective has been reached. Simulations are run using INSEEs dynamic microsimulation model (the DESTINIE model). Pension reforms from 2003 (including the 2010 et 2014 reforms) should have a sensible impact on retirement ages. Between the cohort born in 1943 and the one born in 1990, the average retirement duration should increase by a bit less than one third of the gains in life expectancy after 60, whereas this ratio should have been larger than three quarters without the reforms. Overall, the ratio between career duration and retirement duration does not remain strictly constant over cohorts, but only varies within a range of +/5 %. |
| Keywords: | pension system, microsimulation |
| JEL: | H55 J26 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:crs:wpdeee:g2014-15&r=all |
| By: | P. AUBERT (Conseil d'orientation des retraites et Insee) |
| Abstract: | Transparent pension rules imply that workers are able to predict, a few years before they retire, the approximate amount of public pension they will receive. This predictability of the amount of pension is also a necessary condition to enable workers to make an informed decision when they choose the age at which they wish to retire. However, the several retirement reforms across the past 20 years in France may have hindered the predictability of the level of pension in the French public pension system, by modifying calculation rules for workers who were already very close to retirement ages. We quantify this impact of retirement reforms on the predictability of pension for workers aged 50 and more, by running simulations using a microsimulation model. Although there exists in all cohorts a share of workers who were not impacted by retirement reforms and therefore enjoyed a complete predictability of their pension, this happens to concern only a minority of workers. Among all cohorts born between 1933 and 1956, most workers actually had to face changes in calculation rules after the age of 50, and therefore could only make at that age and also often at the age of 55 a biased prediction of their future level of public pension. However, the change in the level of pension either negative or positive remains small in most cases. |
| Keywords: | pension system; microsimulation |
| JEL: | H55 J26 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:crs:wpdeee:g2014-04&r=all |
| By: | Beshears, John (Harvard University); Choi, James J. (Yale University); Hurwitz, Joshua (National Bureau of Economic Research); Laibson, David (Harvard University); Madrian, Brigitte C. (Harvard University) |
| Abstract: | What is the socially optimal level of liquidity in a retirement savings system? Liquid retirement savings are desirable because liquidity enables agents to flexibly respond to pre-retirement events that raise the marginal utility of consumption. On the other hand, pre-retirement liquidity is undesirable when it leads to under-saving arising from, for example, planning mistakes or selfcontrol problems. This paper compares the liquidity that six developed economies have built into their employer-based defined contribution (DC) retirement savings systems. We find that all of them, with the sole exception of the United States, have made their DC systems overwhelmingly illiquid before age 55. |
| Date: | 2015–05 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:harjfk:rwp15-024&r=all |
| By: | M. BACHELET (Insee); A. LEDUC (Insee); A. MARINO (Insee) |
| Abstract: | Destinie is a dynamic microsimulation model whose main purpose is the evaluation of social reforms, in particular regarding retirement and elder care. This paper presents the method used to generate the new sample of this model, the first results and the methodological improvements compared to the previous sample. For its retrospective part, the new sample comes from the Patrimoine 2009 survey produced by the French Institute of Statistics. Thereafter, the professional and family trajectories are simulated until 2060 according to transition probabilities estimated from other data. Regarding pensions, for example, these trajectories are very important since they influence the retirement age and the pension. The main methodological improvements were made on three aspects of the model: the estimation of transitions matrix on the labor market, the reconstruction of the family links and the adjustment to macroeconomic targets. The careers were estimated from new data sets adapted to each career phase. The method used for the reconstruction of family links improves the distribution of the number of children per woman. Finally, transition probabilities are adjusted every year in order to meet macroeconomic targets exactly and not only on average. |
| Keywords: | microsimulation, pensions, retirement behavior |
| JEL: | H55 J26 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:crs:wpdeee:g2014-01&r=all |
| By: | Javier Diaz Gimenez (IESE Business School); Julian Diaz Saavedra (Department of Economic Theory and Economic History, University of Granada.) |
| Abstract: | In this article we explore the consequences of exempting minimum pensions from the Pension Revaluation Index (PRI) introduced by the 2013 reform of the Spanish pension system and making their real value a constant share of per capita output instead. We nd that this change essentially implies trading-o higher minimum pensions against a lower PRI |which reduces the real value of all other pensions| and against the higher consumption tax rates that are needed to nance them. When faced with these trade-os, the optimal responses of the households in our model economy are to work shorter hours, to retire earlier, and to save less. They also consume less to avoid paying some of the higher consumption taxes. These responses imply that preserving the real value of minimum pensions makes the growth rates of output smaller. We also nd that this change compresses the range of pensions, and that as many as 48 percent of the retirees in our model economy collect the minimum pension in 2050. This share is 28 percentage points higher than the share of 2010. It also implies that pensions are more equally distributed because the bottom tail of the pension distribution collects a larger share of the total. Interestingly, we also nd that preserving the real value of minimum pensions brings about large welfare gains. |
| Keywords: | Computable general equilibrium, social security reform, retirement. |
| JEL: | C68 H55 J26 |
| Date: | 2015–09–01 |
| URL: | http://d.repec.org/n?u=RePEc:gra:wpaper:15/04&r=all |
| By: | Y. DUBOIS (Insee); A. MARINO (Insee) |
| Abstract: | Equity and solidarity are main concerns for the French pension system. These concepts are linked with the one of returns: return between generations, between pensioners of the same generation& Returns allow to summarize several dimensions: either related to financial data (pensions and contributions) or durations (activity and retirement). We choose here two indicators: the internal rate of return and the recovery rate. Second, those actuarial indicators should be interpreted with caution. In an intertemporal approach, the choice of the updating rate is crucial. Moreover, how to compare people of different generations who have not known the same growth pace ? The pension system is strongly linked to the economic growth, such a dependence has an impact on the interpretation of the statistics. We use the microsimulation model Destinie 2 that allows us to project pensions in the long run for each individual and, thus, to have all information we need to estimate the indicators: working life duration, social security contributions, pensions and retirement duration. To compute the level of contributions, we have to take account of the diversification of the financing of the french pension system. |
| Keywords: | pensions, microsimulation, rate of return |
| JEL: | H55 J26 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:crs:wpdeee:g2015-02&r=all |
| By: | James J. Choi |
| Abstract: | Defined contribution (DC) pensions are an increasingly important means of financing retirement consumption. Because individuals often have substantial discretion over how much is contributed to their DC pension, studying DC contribution choices provides general insights into the determinants of individual economic decision-making. The literature has found strong deviations from many predictions of classical frictionless optimizing models. I provide an overview of the U.S. DC pension system and review the literature on the effect of matching contributions, automatic enrollment, active choice deadlines, choice overload, financial literacy, peer effects, mental accounting, and personal experience on individuals’ DC contributions. |
| JEL: | D14 J32 |
| Date: | 2015–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:21467&r=all |
| By: | P. AUBERT (Secrétariat général du Conseil dorientation des retraites et Insee) |
| Abstract: | The 1983 and 2003 French pension reforms have created a complex framework, in which the number of contribution years impacts the minimal retirement age and the reference age that determines pension penalty or bonus. We illustrate the consequences of this framework both on typical career path and using the DESTINIE microsimulation model, and we show that it results in an implicit redistribution among workers, favoring those who start their career at an age which allows them to reach the required number of contribution years exactly at the minimal retirement age. Besides, the increase in pension following a one-year postponement of the retirement age yields different returns among workers. It is larger for those who are still working compared to those who are not (+5.2% vs. +4.3% for workers born in 1955-1964), but it also varies according to wage level, sector, or the situation of people with several pension schemes. |
| Keywords: | pension system; number of contribution years; pension penalty; pension bonus |
| JEL: | H55 J26 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:crs:wpdeee:g2015-10&r=all |
| By: | Y. DUBOIS (Insee); A. MARINO (Insee) |
| Abstract: | In this study, we consider two goals of the French pension system: equity and solidarity. We choose two indicators that allow us to measure to what extent these objectives are met - the internal rate of return and the recovery rate - and compute them by microsimulation with Destinie 2, for the private sector, with two different approaches. First, in an intergenerational perspective, we consider these objectives between generations. We study their evolutions from the generation born in 1950 to the generation born in 1985 and underline the effect of each of the three driving forces behind those evolutions: the funding of the pension system, that is more and more diversified, the economic growth that induces different effects according to those indicators and, finally, the duration of the retirement, and how it has been modified by reforms. Second, in an intragenerational perspective, we compare the returns for different categories of people in the same generation. Some differences are indirectly due to the pension system, such as life expectation. They explain a large part of the differences of returns between men and women. On the opposite, despite the fact that they live less longer than others, unskilled people have a higher return. Other differences can be directly due to the pension system. For example, bonuses for children and survivors pension have very important redistributive effects toward married couples and people with children. |
| Keywords: | pensions, microsimulation, rate of return |
| JEL: | H55 J26 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:crs:wpdeee:g2015-06&r=all |
| By: | Chen, Hung-Ju |
| Abstract: | This paper examines the effect of fertility and official pension age on long-run pay-as-you-go (PAYG) pensions based on an overlapping generations model. We find that increasing the fertility rate or official pension age does not necessarily raise pensions. When the output elasticity of capital is low, an increase in the fertility rate or official pension age may raise pensions, but such a change reduces pensions if the output elasticity of capital and the tax rate are high. |
| Keywords: | Fertility; Official pension age; OLG, PAYG pensions. |
| JEL: | H55 J13 J26 |
| Date: | 2015–09–03 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:66429&r=all |
| By: | Robert Clark; Annamaria Lusardi; Olivia S. Mitchell |
| Abstract: | This paper uses administrative data on all active employees of the Federal Reserve System to examine participation in and contributions to the Thrift Saving Plan, the system’s defined contribution (DC) plan. We have appended to the administrative records a unique employee survey of economic/demographic factors including a set of financial literacy questions. Not surprisingly, Federal Reserve employees are more financially literate than the general population; furthermore, the most financially savvy are also most likely to participate in and contribute the most to their plan. Sophisticated workers contribute three percentage points more of their earnings to the DC plan than do the less knowledgeable, and they hold more equity in their pension accounts. Finally, we examine changes in employee plan behavior a year after the financial literacy survey and compare it to the baseline. We find that employees who completed an educational module were more likely to start contributing and less likely to have stopped contributing to the DC plan post-survey. |
| JEL: | D91 J26 J32 J33 |
| Date: | 2015–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:21461&r=all |
| By: | Bassetti, Thomas; Rebba, Vincenzo |
| Abstract: | This paper investigates the effects of individual and environmental determinants on physical and cognitive impairment of Europeans aged 50 and older using data drawn from the Survey of Health Aging and Retirement in Europe (SHARE). The aim is to understand the different paths that need-related determinants of long-term care might take across individuals. As dependent variables, we consider several measures of physical and cognitive disability which are regressed on a list of covariates which includes biological, health, behavioural, socio-demographic and early-life conditions of individuals. We adopt a methodology that combines the structure of random effects models for longitudinal data with the flexibility of a tree regression method. We show the existence of clusters in the main determinants of functional decline (physical and cognitive). Our findings are in line with the existing literature, but, at the same time, we further characterize previous evidence: 1) cognitive impairment, measured by the results of a memory test, strongly depends on educational attainments, age and respondents’ country of residence; 2) physical impairment, measured through the loss of handgrip strength, basic and instrumental activities of daily living (ADLs, IADLs) and mobility, strongly depends on health and behavioural factors. |
| Keywords: | Long-term care, physical impairment, cognitive impairment, health behaviour, early-life conditions, RE-EM tree analysis, SHARE. |
| JEL: | I12 J14 J26 |
| Date: | 2015–08–18 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:66167&r=all |
| By: | Alicia H. Munnell; Anqi Chen |
| Abstract: | The 2015 Social Security Trustees Report assumes that – for just the third time since the automatic adjustments were adopted in 1975 – Social Security recipients will not receive a cost-of-living-adjustment (COLA) in 2016. The reason is that the Consumer Price Index is not expected to increase in the base period used to determine the COLA. The anticipated lack of a Social Security COLA will cause a flap in the Medicare program because, by law, the cost of higher Medicare Part B premiums cannot be passed on to most beneficiaries when they do not get a raise in their Social Security benefits. This flap also highlights the complicated interaction between Medicare premiums, which are generally deducted automatically from Social Security benefits, and the net benefit – the money available for non-health care expenditures. Because, for a number of reasons, the COLA does not fully reflect the increase in health care costs faced by the elderly, the net Social Security benefit does not keep pace with inflation. This brief explores the interaction of inflation, Medicare premiums, and Social Security benefits. The discussion proceeds as follows. The first section describes Social Security’s COLA. The second section describes how Medicare premiums are calculated and explains next year’s flap. The third reports that Medicare Part B premiums have increased more than twice as fast as the COLA and discusses three reasons why this differential matters for non-medical care spending. The final section concludes that, while the inflation adjustment in Social Security is extremely valuable, the rise in Medicare premiums undermines the ability of beneficiaries to maintain their purchasing power for non-health-care items. |
| Date: | 2015–08 |
| URL: | http://d.repec.org/n?u=RePEc:crr:issbrf:ib2015-14&r=all |
| By: | Johannes Geyer; Thorben Korfhage |
| Abstract: | Germany introduced a new mandatory insurance for long-term care in 1995 as part of its social security system. It replaced a system based on means tested social welfare. Benefits from the long-term care insurance are not means tested and depend on the required level of care. The insurance provides both benefits in kind and cash benefits. The new scheme improved the situation for households to organize informal care at home. This was one goal of the reform since policymakers view informal care as a cost-saving alternative to formal care. This view however neglects possible opportunity costs of reduced labor supply of carers. We exploit this reform as a quasi-experiment and examine its effect on the labor supply of caregivers who live in the same household as the care recipient. We find strong negative labor market effects for men but not for women. We conduct a series of robustness tests and find results to be stable. |
| Keywords: | labor supply, long-term care, long-term care insurance, natural experiment, quasi-experiment |
| JEL: | J22 H31 I13 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp1500&r=all |
| By: | Yoshino, Naoyuki (Asian Development Bank Institute); Morgan, Peter (Asian Development Bank Institute); Wignaraja, Ganeshan (Asian Development Bank Institute) |
| Abstract: | This paper assesses the case for promoting financial education in Asia. It argues that the benefits of investing in financial education can be substantial. Data are limited, but indicate low financial literacy scores for selected Asian countries. As economies develop, access to financial products and services will increase, but households and small and medium-sized enterprises need to be able to use the products and services wisely and effectively. More effective management of savings and investment can contribute to overall economic growth. Moreover, as societies age and fiscal resources become stretched, households will become increasingly responsible for their own retirement planning. Asia’s evolving experience suggests that more national surveys of financial literacy are needed and that coherent, tailored national strategies for financial education are essential for success. |
| Keywords: | financial education; financial literacy; education investment |
| JEL: | D14 D18 G21 G28 I25 L26 |
| Date: | 2015–08–24 |
| URL: | http://d.repec.org/n?u=RePEc:ris:adbiwp:0534&r=all |
| By: | Milena Lavigne (IPC-IG); Luis Hernán Vargas (IPC-IG) |
| Abstract: | The current social protection policies and programmes in Jamaica can trace their origins to the beginning of the second decade of the 20th century. With the independence of the country from the United Kingdom in 1962, the new Jamaican government moved away from past colonial social policies, increasing social spending and establishing a new social protection system through the implementation of the Old Age and Superannuation Scheme Law in 1958 and the National Insurance Act of 1965, which created the National Insurance Scheme (NIS), a pay-as-you-go social security system, which is compulsory for the entire active population.(…) |
| Keywords: | Social Protection Systems, Latin America, Caribbean, Jamaica |
| Date: | 2015–05 |
| URL: | http://d.repec.org/n?u=RePEc:ipc:opager:291&r=all |
| By: | Richard K. Green; Hyojung Lee |
| Abstract: | The United States is aging, and many baby boomers are reaching or will soon reach theretirement age of sixty-five. On the other hand, the Millennials, the largest generation in the U.S.history, has faced the problems of high rents relative to incomes and volatility in housing market.Given the shifts, we are again seeing growing debates about how these changes in age structurewill affect housing and labor markets.To address these concerns, we revisit Green and Hendershott (1996) and analyze the linksbetween the willingness to pay for a constant-quality house and demographics using the Census2000 and 2005-2011 American Community Survey 1-Year Public Use Microdata Sample data.The results generally reconfirm what Green and Hendershott (1996) found: The massivedemographic shift will not result in another housing crisis. This is because the educational andincome levels of the current and future seniors are relatively higher than before, leading them toconsume more than previous generations. Also, the size of the Millennial generation will drivethe growth of aggregate housing demand, although the growth of per household housing demandmay be relatively modest. |
| Keywords: | Age, Cohort Effects, demographics, housing demand, Projections |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:luk:wpaper:9473&r=all |
| By: | Leonardo José Rolim Guimarães (IPC-IG); Secrétaire des politiques de sécurité sociales (IPC-IG); Rogério Nagamine Costanzi (IPC-IG); Directeur du département du régime général de sécurité social (IPC-IG); Graziela Ansiliero (IPC-IG); spécialiste en politique publique et gestion gouvernementale – Ministère de la Planification (IPC-IG); Brésil (IPC-IG) |
| Abstract: | Au cours des 10 dernières années, le Brésil a fait de sérieux progrès dans son système de protection sociale. Ces progrès sont le résultat daméliorations rendues possible par le piller des contributions, comme la sécurité sociale, par les piliers à caractères non-contributifs, et par la coordination des politiques de contribution et celles non-contributives. En ce qui concerne plus particulièrement la sécurité sociale, la couverture de la population par la sécurité sociale a augmenté significativement. |
| Keywords: | protection sociale, systèmes classiques de contribution, inclusion, population active pauvre, sein de la sécurité sociale |
| Date: | 2014–07 |
| URL: | http://d.repec.org/n?u=RePEc:ipc:opfran:237&r=all |
| By: | Mariana Naranjo Bonilla (IPC-IG) |
| Abstract: | "Durante las últimas tres décadas, la matriz de protección social ecuatoriana ha estado caracterizada por las intervenciones sectoriales universales en educación y salud, en combinación con la aplicación de programas específicos de asistencia social focalizados en los más pobres, como el Bono de Desarrollo Humano (BDH) y la pensión asistencial para discapacitados. Si bien se logró expandir la infraestructura social y se mejoraron los niveles de educación y salud de la población, el efecto redistributivo de las políticas sociales ha sido limitado, particularmente en la población rural y urbana marginal de las principales ciudades del país."(...) |
| Keywords: | Sistemas de Protección Social, América Latina, el Caribe, Ecuador |
| Date: | 2014–11 |
| URL: | http://d.repec.org/n?u=RePEc:ipc:opespa:266&r=all |