nep-age New Economics Papers
on Economics of Ageing
Issue of 2024‒04‒22
seven papers chosen by
Claudia Villosio, LABORatorio R. Revelli

  1. “Safe” Annuity Retirement Products and a Possible US Retirement Crisis By Lambert, Thomas; Tobe, Christopher
  2. The effect of Covid pension withdrawals and the Universal Guaranteed Pension on the income of future retirees in Chile By Carlos Madeira
  3. Assessing Chile’s pension system: challenges and reform options By Evans, Christopher; Pienknagura, Samuel
  4. Effects of Welfare Receipt on Well-being: Evidence from older people in Japan By MATSUMOTO Kodai
  5. Does High Involvement Management Make You Work Longer? Insights from Linked Survey and Register Data By Böckerman, Petri; Bryson, Alex; Ilmakunnas, Ilari; Ilmakunnas, Pekka
  6. Do late-life divorces produce greater gender inequalities? Evidence from administrative data By Léa Cimelli; Carole Bonnet; Anne Solaz
  7. Population and development in the Caribbean (2018–2023): accelerating implementation of the Montevideo Consensus By Jones, Francis

  1. By: Lambert, Thomas; Tobe, Christopher
    Abstract: This paper examines a looming possible crisis in many Americans’ retirement plans due to the proliferation of annuity products in their retirement investment portfolios. As defined benefit pension plans have almost completely disappeared as a means of retirement savings and have been replaced by defined contribution retirement plans over the last 40 to 50 years, a great number of private and public sector defined contribution retirement plans have become laden with insurance contracts called annuities. Of the remaining solid defined benefit plans many, through a process called Pension Risk Transfer are being converted to high-risk single entity annuities. Such products have been sold to employers and employees as “safe” and “guaranteed’ financial instruments that that are just as good as a defined retirement benefit plan backed by Federal PBGC (Pension Benefit Guarantee Corporation) insurance. The results of the analysis in this paper calls this into question, and with so many of these annuities having ties to investments and loans related to risky assets, the authors find that many annuity products are exposed to systemic risk that could lead to a bust in the pensions of many retirees and soon-to-be retirees. The “Emperor has no Clothes” as the life insurance industry has poured billions of dollars into advertising, lobbying, commissions & trade articles with misinformation on annuities with everyone afraid to call out the obvious fiduciary problems. To invest in annuities one must look the other way at one of most basic investment principals -diversification, i.e., “do not put your eggs in one basket.” Excessive monopolistic profits through secret spread fees have remained hidden with no US Federal regulation or oversight. This paper shows the drawbacks, weaknesses, and pitfalls of annuities as investments for retirement plans as well as the injustices of such plans toward lower income workers.
    Keywords: annuities, financialization, monopoly capital, pensions, retirement, risky assets, systemic risk.
    JEL: B51 B52 G18 G22
    Date: 2024–03–18
  2. By: Carlos Madeira
    Abstract: Chile implemented large pension withdrawals during the Covid pandemic. Afterwards, Chile increased non-contributory benefits in a quasi-universal scheme. Simulating future pensions, I show that the average loss in contributory pension income is 27.9%, with losses of 23.9% and 31.4% for men and women, respectively. After accounting for public transfers, the average loss in total pension income is just 6.2%, with losses of 7.5% and 5.2% for men and women, respectively. Current retirees lost just 1.1% of their pension income after accounting for the government transfers. The state may end up covering 92% of the total value of the pension withdrawals through increased transfers.
    Keywords: pension wealth, Covid pandemic, fiscal costs
    JEL: D14 H55 O54
    Date: 2024–03
  3. By: Evans, Christopher; Pienknagura, Samuel
    Abstract: This paper takes stock of Chile’s defined contribution pension system and assesses reform options aimed at increasing replacement rates. An international comparison shows that, despite being quite influential when established, it is now delivering low replacement rates relative to OECD peers, as its parameters did not adapt over time to changing demographics, declining global returns, higher-than-expected informality in the labor market, and, more recently, to legislation allowing for pension savings withdrawals to counter the effects from the COVID-19 pandemic. We find that a reform that raises contribution rates and the retirement age would significantly improve replacement rates and lower fiscal costs associated with the system, especially if accompanied by complementary policies to boost workers’ contribution density.
    Keywords: Chile; fiscal costs; pensions; replacement rates
    JEL: D14 H30 H55
    Date: 2024–03–08
  4. By: MATSUMOTO Kodai
    Abstract: The purpose of this study is to verify whether receiving public assistance affects the well-being of the older people. When socially nondependency norms have formed, receiving public assistance may reduce well-being. The study focuses on older people in Japan, where public assistance is minimal. The results show that receiving public assistance has little effect on well-being for the older people but negatively affects the working-age population. The older people are likelier to not work, which may weaken the nondependency. Additionally, the heterogeneity in the relationship between the receipt of public assistance and well-being is confirmed by region.
    Date: 2024–03
  5. By: Böckerman, Petri (University of Jyväskylä); Bryson, Alex (University College London); Ilmakunnas, Ilari (Finnish Centre for Pensions); Ilmakunnas, Pekka (Aalto University)
    Abstract: The management practices employers deploy may affect the utility workers derive from their jobs, potentially affecting the types of jobs they enter and also their propensity to exit the workforce. Ours is the first paper to assess whether employers' use of high involvement management (HIM) practices may influence workers' retirement intentions. Using linked survey and register data to analyze different combinations of HIM, we find that information sharing and employer-provided training lead to intentions to retire later among those who are close to the official retirement age in Finland.
    Keywords: retirement, high involvement management, information sharing, training
    JEL: J26 J32
    Date: 2024–02
  6. By: Léa Cimelli; Carole Bonnet; Anne Solaz
    Abstract: Though the number of divorces has stabilized in several European countries at prime age, it continues to increase at older ages. Drawing upon a large French administrative database, the Echantillon Démographique Permanent (Permanent Demographic Sample), a panel study that follows 4.4% of the French population every year, this paper presents new findings on the economic consequences of grey divorces, occurring at age 50 and over. We implement a two-way fixed-effect regression with a control group to assess the causal effects of divorce on men and women. To do so, we compare divorced individuals with people that will divorce but have not done so yet. The results confirm that the decrease in living standards is larger, on average, for women than for men. For the former, this decrease is larger when divorce occurs after 50 (24% one year after the divorce) than before (18%). Thus, grey divorce increases gender inequalities following break-ups. Public and private transfers mitigate post-grey divorce gender inequalities, especially for the poorest women. Recovery through re-partnering plays an important role in moderating the negative consequences of divorce.
    Keywords: grey divorce, gender inequalities, living standards, public transfer, private transfer, two-way fixed effects, France, DIVORCE / DIVORCE, FRANCE / FRANCE, NIVEAU DE VIE / STANDARD OF LIVING, SENIOR / SENIOR, CONSEQUENCE ECONOMIQUE / ECONOMIC CONSEQUENCES
    Date: 2024
  7. By: Jones, Francis
    Abstract: This study reports on progress made in the implementation of the Montevideo Consensus on Population and Development in the Caribbean subregion over the period 2018–2023. It begins by presenting an analysis of demographic trends in the Caribbean before addressing each of the thematic sections of the Montevideo Consensus, reviewing policies and programmes implemented by governments and civil society organizations, assessing the impact of those actions, and making recommendations to accelerate implementation of the Consensus. The study discusses projected population declines, population ageing and trends in international migration. It identifies a need for greater attention to issues affecting youth, including violence, unemployment, and teenage pregnancy. It describes progress in the adoption of legislation on child protection and child justice, but also highlights an ongoing need to strengthen the institutions responsible for implementing these laws. In response to population ageing, while governments have sought to strengthen policies and programmes for older persons, the pace of demographic change demands still greater attention to the economic and social well-being of older persons and healthy ageing. There have been advances in sexual and reproductive health and rights, and progressive reforms in a few countries, but these good practices need to be adopted more widely to further reduce teenage pregnancies, maternal mortality and to eliminate HIV. There is now more data on gender-based violence in the Caribbean and this confirms the need to address the high levels of violence against women and institutionalize services for survivors. The study also argues for increased subregional cooperation to manage both labour migration and migration in response to humanitarian emergencies.
    Date: 2024–02–16

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