Income Provision Research Articles

Mean–variance optimality of a retirement lump sum conversion strategy: implementation in Australia

Portfolios that are more efficient than those on the capital market line can be constructed by investing at the risk-free rate to purchase payouts that occur prior to the end of the single-term investment horizon. These hyperefficient portfolios provide the mean–variance solution to an outstanding problem in finance, namely how optimally to convert an employment termination lump sum into a retirement income stream. The mean–variance optimality can be used to investigate risk to the retiree under other criteria. The new results have profound implications for all stakeholders in retirement income provision industries and associated service industries. Implementation of the strategy is demonstrated in the Australian context.

Streams, Grants and Pools: Stakeholding, Asset-Based Welfare and Convertibility

Many recent policy-related debates have centred on the possibility of constructing post–social insurance and post–means tested forms of income provision. Such asset-based welfare and stakeholding proposals have included Basic Income (BI) and some form of endowment or Capital Grant (CG) scheme. Although the differences between these systems are certainly real, and present us with distinct policy options, they are often overstated. This article has two objectives, therefore – the first of which is to identify the key similarities and differences between BI and CGs, and to argue the case for a partial, non-time-limited and unconditional BI. Second, this article reviews the issue of convertibility, i.e., the main normative questions to consider when designing a system permitting the mortgaging of income streams into lump-sum grants or pools.

Social Assistance Policies and Decentralization in the Countries of Southern Europe

The focus of this article is on those policy areas – social assistance for the poor, family transfers and social care services – which in most comparative analyses are indicated as the weakest components of the Mediterranean safety net. Trends in these policy areas are analysed within the framework of the division of responsibility and labour between welfare state, family solidarity, and role of the third sector and of the market. Southern European welfare states have been described as at the same time “rudimentary” and highly “familialised”, with charities and third sector agencies more or less idiosyncratically “filling the holes” both of welfare state and of family solidarity. Until the nineties, all of them lacked a last resource safety net, but in the case of specific categories. During the nineties, these countries have partly restructured the composition and logic of their safety nets. On the one hand, the welfare mix has been more systematically regulated. On the other hand, anti-poverty policies entered the policy discourse and agenda, although only Portugal has succeeded in introducing a minimum income provision at the state level. The ensuing developments strengthened both commonalities and differences among these countries. Dependence on family solidarity and heavy reliance on third sector actors remain a common feature. But countries differ in the impact of territorial differentiation in “welfare mixes”, which, particularly in Spain and Italy, is increasingly rooted in the institutional set up of the state.

Private Pension Provision: An OECD View

Private pension arrangements are being promoted around the world to play a more central role in retirement income provision. One key policy concern of this trend is how risks inherent to funded arrangements will be addressed. Regulatory efforts are most successful when tackling informational asymmetries and other operational problems that hinder market efficiency. Over recent years, the OECD has issued a set of core principles that set out good practices in pension regulation. The principles and related guidelines focus on promoting high-quality managerial processes and effective internal governance and external monitoring. In addition, the guidelines identify a set of basic rules to protect the rights of members and beneficiaries and prudential standards to promote high levels of funding and appropriate investment strategies that take into account the structure of the pension plan's liabilities.

The 2004 Corporate Tax Revisions as a Spaghetti Western: Good, Bad, and Ugly

The American Jobs Creation Act (AJCA) of 2004 eliminated the Extraterritorial Income provision (found to be an export subsidy), a change that improved economic efficiency and tax administration, as was likely the case with a number of tax shelter provisions. A provision allowing a special deduction from taxable income for manufacturing and certain other industries is likely to increase distortions and add complexity to the code. A temporary repatriation tax holiday for foreign source income is also likely to reduce revenue with little justification. Other foreign tax provisions are, however, more difficult to evaluate.

Solar photovoltaic water pumping in India: a financial evaluation

SYNOPSIS A simple framework for the financial performance evaluation of a solar photovoltaic (SPV) water pump has been presented. The unit cost of water delivered by such a pump has been estimated. The monetary benefits accrued to the end user have also been quantified on the basis of the amount of diesel or electricity saved. The Net Present Value and Internal Rate of Return of investment in an SPV water pump have also been estimated. The effect of fuel price escalation on the financial performance indices has been evaluated along with estimation of the break-even prices of diesel and electricity. The effects of financial incentives such as capital subsidy, accelerated depreciation-related income tax benefits and provision of a low interest loan on the break-even prices of diesel and electricity have also been studied. Results of some numerical calculations for a 1.8 kWp SPV pump are briefly presented and discussed.

Retirement Incomes for an Ageing Australia

AbstractOver the past 100 years, retirement income provision in Australia has evolved into a multi-pillar arrangement comprising the Age Pension, the Superannuation Guarantee and voluntary retirement saving. With fully funded superannuation and a public pension that is both less generous than many other countries and means tested, Australia's retirement income arrangements are well placed to cope with population ageing. However concerns remain in relation to adequacy, efficiency and the vulnerability of private provision to trends in labour, economic and financial markets.

The Way Out of the Pensions Quagmire

This book provides an analysis of the current problems of pension provision in the UK and a radical plan for reform. The authors believe that the system of retirement income provision in the UK is so mired in complexity that nothing less than wholesale change is necessary. The authors believe that state pensions should only be offered on a contributory basis - there should be no automatic right to a 'citizen's pension', as has been proposed by many commentators. Attention should also be paid to the social security system to remove the perverse incentives of means testing. Anomalies and special treatment of favoured groups in the tax system should also be removed. The Way Out of the Pensions Quagmire proposes a holistic approach to pension reform that takes proper account of the interaction between pensions, tax, social security and financial regulation.

Retirement Incomes in New Zealand

AbstractNew Zealand has a unique approach to retirement income provision. The state pension arrangements have the advantage of being very simple and easy to understand and administer. While there are numerous issues associated with the ageing of the population that may require modification to the parameters of state provision in the future, there is little political disagreement about the basic design of the state pension. In ensuring universal coverage with a flat rate taxable pension for everyone without the need for a contributions record, New Zealand has prevented elderly poverty to date. Supplementary private provision has been unsubsidised and recent debate has focused on the need to encourage more private saving particularly through work-based schemes. Nevertheless there are numerous advantages to New Zealand's tax neutral approach, which may offer lessons to reformers in other countries. With some caveats, New Zealand appears well placed to weather the increased expenditures associated with the retirement of the baby boomers.

Superannuation: A Guide to the Field for Australian Economists

There is a worldwide effort to identify international best practice in retirement income provision. Legions of superannuation experts have stepped forward, from the ranks of accountants, actuaries, demographers, financial analysts, lawyers –and economists. This paper seeks to compile disparate pieces of advice, distilled from recent research, which economists can usefully pass on to superannuation members, managers, trustees and policymakers. No prior knowledge of superannuation is assumed. Various policy issues are addressed, including the inadequacy of Australia’s mandatory 9% contribution rate, the efficiency and equity costs of our unusual “front-end” superannuation taxes, and the tension in regulatory policy between protecting inactive or ill-informed contributors and giving well-informed contributors the right to back their personal judgements.

The Privatization of Retirement Income? Variation and Trends in the Income Packages of Old Age Pensioners

The aim of this article is to investigate the changing balance between public and private components in the income packages of old age pensioners in a selection of nine OECD countries. Four waves of data from the Luxembourg Income Study databank are used to analyse variation across countries and across time in the public/private mix of retirement income. The article seeks to address two main questions: (a) Is there a general trend towards a stronger reliance on private income provision and, perhaps, a trend towards convergence in the balance between public and private income components? (b) Is there evidence of a tendency for substitution/crowding out between public and private income components, and hence a tendency for crossnational convergence in the relative income position enjoyed by old age pensioners – despite variation in the generosity of national pension systems?

Social Protection and Economic Integration

In the past two decades of the 20th century, governments around the world began to apportion greater responsibility for old-age income provision to individuals and market forces through the privatization of pension systems. This article examines the political and economic foundations of the turn to private pension systems through a quantitative analysis of 57 countries around the world. I offer a causal model to explain the likelihood and degree of pension privatization based on the unique incentives and constraints created by domestic political and economic structures in each country. I show that the likelihood and degree of structural pension reform are shaped by the cost of the existing pension system, political party structures, domestic investment and debt levels, and geopolitical networks.

Investigating the benefits of mutuality: Mutual versus proprietary annuity provision

The paper is concerned with annuities research and retirement income provision. This is an important area of research in the UK, as annuity instruments lie at the heart of any post-retirement income scheme. The paper examines the structural differences across the provider market for pension annuities — financial instruments typically exchanged for accrued pension wealth to provide an income stream for life. The financial services industry is probably unique in having a substantial mutual sector coexisting with, and competing against, joint stock companies. Specifically in this paper, we undertake an empirical examination of the differences observable across UK annuity rates, between the mainstream mutual and Plc providers over the period 1994–2001. This time frame has encompassed a wholesale transformation of the UK life assurance market, as the majority of mutual assurance providers have elected to change corporate form through the process of demutualisation. This trend towards wholesale proprietary structures has concurred with a general consolidation across the financial services industry. The paper examines these changes from an annuitant's perspective and shows that mutuality appears to have served policyholders well, as demonstrated by improved annuity rate offerings across a spectrum of standardised annuity products.

Gendering the Pension Promise in Canada: Risk, Financial Markets and Neoliberalism

This article argues that retirement income provision in Canada is built on gendered assumptions, which produce material disadvantage for women. These inequalities are being exacerbated by current neoliberal trends towards the 'marketization' and individualization of pension provision, supported by tax, securities and corporate legal norms. The argument is developed using recent legislative changes to the operation of the Canada Pension Plan and recent developments in the regulation of mutual funds in Ontario as case studies. The article concludes by sketching out some possible points of departure for feminist interventions in pension privatization debates.

Savings and pensions in The Netherlands

We describe the distribution of private wealth of Dutch households over the life cycle and relate this to the size of individual entitlements to pay-as-you-go social security benefits and funded pension benefits. We also investigate saving motives and find that saving for old age plays only a minor role. Precautionary motives play some role, but in view of the very extensive social safety net it does not seem likely that precaution is an important factor in saving decisions. Altogether, the data are consistent with the view that an extensive social safety net and generous old age income provisions reduce the need to accumulate private wealth.

European Pensions and Global Finance: Continuity or Convergence?

The retirement of the baby boom generation is a profound threat to the structure and organisation of continental European retirement systems. Whereas the German financial system, for example, has been often favourably compared to the Anglo-American system of corporate governance, it is argued in some quarters that it will have to become far more American if current living standards are to be maintained. The paper begins by suggesting that these issues should be taken seriously by economic geographers; we have a distinctive perspective that should not be lost in the more general debate. Subsequently, the paper focuses on three threads or themes. Why the demographic crisis is a crisis not just a transition; why global finance is deeply implicated in any European solution to the demographic crisis, and; whether continental European countries will be able to maintain their inherited retirement income systems in the face of competition from the Anglo-American model. Unfunded social security benefits threaten the economic welfare of all citizens; those that will be retired and those that will continue working over the next 20 to 30 years. Proffered solutions tend to rely upon the market rather than the state, and tend to match or mimic Anglo-American financial practices. This does not mean that continental Europe need converge upon the Anglo-American system of finance and retirement income provision. But it does seem highly likely that continental European countries will seek solutions that draw upon aspects of this system. Rather than thinking of convergence to the Anglo-American model as the most likely outcome, and rather than thinking of continuity of difference between systems as a viable scenario, European countries will in some way or another be forced to seek accommodation with global finance. Whether continental Europe will be able to hold global finance at bay remains to be seen. Global finance may penetrate national economic and social systems far deeper than ever intended.

Rural Scotland Today: The Best of Both Worlds?

Part 1 Introduction and contextual information: review of the literature methodology area profiles including contextual information rural advantage or rural disadvantage? Part 2 The Scottish rural experience: housing employment work and changing rural economies development income and rural poverty service provision community life in rural areas social change and migration belonging and integration in rural communtities rural culture and the rural church.

Minimum Income in Switzerland

This article gives an overview of the prevailing system of minimum income provision in Switzerland. Minimum income is understood as monetary transfers supplied by social insurance or social assistance which guarantee an income floor covering basic living maintenance. Such benefits can either boost regular benefits from social insurance up to a subsistence level or provide temporary means-tested income support to meet urgent needs in emergency situations. Qualifying conditions, scope and duration of benefits as well as institutions running and funding these programmes are described. It is shown that means testing is quite strict, while benefits are very generous from a comparative perspective. Moreover, the article compares Switzerland's social policy towards poor people with the experience of other OECD countries.

Can Pension Systems Cope? Population Ageing and Retirement Income Provision in the European Union

Can Pension Systems Cope? Population Ageing and Retirement Income Provision in the European Union

Cohabiting partners’ economic circumstances and marriage

Past studies of the transition to marriage generally have relied on information about only one individual or have attempted to measure characteristics of potential spouses indirectly. Drawing on data from the two waves of the National Survey of Families and Households (NSFH), we examine the effects of economic circumstances of both partners in cohabiting unions on the transition to marriage. Focusing on both partners in a relationship affords a more direct test of the relative importance of men's versus women's economic circumstances. Our findings suggest that only the male partner's economic resources affect the transition to marriage, with positive economic situations accelerating marriage and deterring separation. Our results imply that despite trends toward egalitarian gender-role attitudes and increasing income provision among women, cohabiting men's economic circumstances carry far more weight than women's in marriage formation.