Contribution Pension Research Articles

Pension Reform and Its Effect on Government Recurrent Expenditure: Evidence from Nigeria’s Data

The study seeks to find out the impact of pension reform on government recurrent expenditure in Nigeria. The Augmented Dickey Fuller and Phillips-Perron unit root tests conducted showed the variables for the research to be integrated at different orders of I(0) and I(1), necessitating the adoption of Autoregressive Distributive Lag (ARDL) for the analysis. The optimal lag structure was 1 which was determined through the Akaike Information criteria. The null hypothesis of no co-integration was rejected based on the ARDL bound test. The error correction term indicates that the speed of adjustment emanating from any short run disequilibrium in the variables is about twenty-one (21) times in the long run. Granger causality showed unidirectional causality running from recurrent expenditure to national pension fund, bidirectional causality running from recurrent expenditure to government revenue and vice versa and unidirectional causality running from national pension fund to government revenue. Diagnostic test also indicated the model to be appropriate, it has no serial correlation, no heteroskedasticity and the model was properly specified. The study recommends increase participation in the contributory pension scheme among public sector employees, increased awareness campaign on the benefits of the contributory pension especially in states and local government, contributor's confidence should be taken into consideration among other recommendations.

The effectiveness of minimum income benefits in poverty reduction in Spain

One of the greatest peculiarities of the Spanish system of minimum income benefits is its complex organisation. There is a wide variety of specific means‐tested benefits whose management and financing depend on the central government. They are designed to protect different contingencies, providing very different levels of protection. On the other hand, the general risk of poverty is covered by regional governments without any coordination and financing from the central government. In this article, we provide a picture of the possibilities and limits of the current set of welfare benefits, focusing especially on its effectiveness in terms of reducing poverty. Our findings show that most benefits are clearly insufficient to cover the risk of poverty in terms of both incidence and intensity. The results show the need for the redesign of the system to better articulate existing benefits in order to prevent new forms of poverty and to respond to emergency situations.Key Practitioner Message: • The Spanish system of minimum income benefits consists of a varied mosaic of benefits that provide very different levels of protection for individuals or households with similar needs; • The contribution of these benefits to the reduction in poverty in Spain is very modest and significantly lower than that of contributory pensions; • The protection provided by MIBS is also unequal by population categories.

Career breaks, broken pensions? Long-run effects of early and late-career unemployment spells on pension entitlements

AbstractUnemployment periods and other career breaks have long-term scarring effects on future labour market possibilities, permanently affecting workers' retirement income and standard of living as pensioners. Previous literature has focused on the impact of job loss on working careers with little attention to its impact on pension wealth, particularly the extent to which longevity heterogeneity amplifies unemployment scars. This paper investigates the effect of single and multiple unemployment spells on the lifetime pension entitlements of earnings-related contributory pension schemes, considering the timing and duration of breaks, alternative lifecycle labour earnings profiles, scarring and restoration effects on labour market re-entry, the existence of pension credits and pension accruals for periods spent outside the labour market, longevity heterogeneity, and the accumulation and decumulation redistributive features of the pension scheme. Pension entitlements are estimated using a backward-looking simulation approach based on the actual Portuguese public pension system rules and stylized labour market profiles identified in the SHARE Job Episodes Panel data using a sequence analysis. Longevity heterogeneity is modelled using a stochastic mortality model with a frailty model. Our results show that the timing and duration of unemployment periods is critical, that scarring effects amplify pension wealth losses, that minimum pension provisions, pension credits and pension scheme redistributive features can partially mitigate the impact of unemployment periods on future entitlements, and that the presence of positive correlation between lifetime income and longevity career breaks can amplify the asymmetry in the distribution of pension entitlements across income groups.

PROBLEMS OF MANAGEMENT OF THE PROCESS OF FORMATION OF THE FINANCIAL MECHANISM OF NON-STATE SOCIAL INSURANCE IN UKRAINE

In this article, the authors substantiate the need for further reform of the national system of private social insurance in Ukraine through a thorough analysis of its financial mechanism. The purpose of the article is a comprehensive analysis of the financial mechanism of private social insurance in Ukraine, providing conclusions and recommendations for its further improvement. The authors use the following research methods: analysis (in the study of individual components of the financial mechanism), synthesis (in generalizing the results of the study of the formation of the financial mechanism), scientific abstraction (taking into account only certain external and internal factors of the system). The paper uses economic and institutional analysis, as the studied sources are primarily analytical documents, scientific publications and regulations. The authors provide a definition of the financial mechanism of private social insurance. The list of studied objects includes: revenues, expenditures, reserves, financial methods and levers (planning and forecasting, investing, lending, incentives, liability, taxation, transfers) and related support (information, regulatory and organizational) of the financial mechanism of the non-governmental social insurance. A comparative analysis of the relevant elements of the financial mechanism (and activities in general) of organizations that provide services for private social insurance: life insurance companies and private pension funds. The results indicate that increasing the level of social protection of citizens in Ukraine is possible only with a comprehensive improvement of the studied financial mechanism. The conclusion is made about the need for further research on the selected problem, especially - the experience of partner countries. Key words: financial mechanism, methods, levers, non-state social insurance, insurance and pension contributions, wage fund, participant, insurance company, non-state pension fund.

PORTFOLIO INSURANCE STRATEGIES FOR A TARGET ANNUITIZATION FUND

AbstractThe transition from defined benefit to defined contribution (DC) pension schemes has increased the interest in target annuitization funds that aim to fund a minimum level of retirement income. Prior literature has studied the optimal investment strategies for DC funds that provide minimum guarantees, but far less attention has been given to portfolio insurance strategies for DC pension funds focusing on retirement income targets. We evaluate the performance of option-based and constant proportion portfolio insurance strategies for a DC fund that targets a minimum level of inflation-protected annuity income at retirement. We show how the portfolio allocation to an equity fund varies depending on the member’s age upon joining the fund, displaying a downward trend through time for members joining the fund before ages in the mid-30s. We demonstrate how both portfolio insurance strategies provide strong protection against downside equity risk in financing a minimum level of retirement income. The option-based strategy generally leads to higher accumulated savings at retirement, whereas the constant proportion strategy provides better downside risk protection robust to equity market jumps/volatilities.

Portfolio Insurance Strategies for Target Annuitisation Funds

Defined contribution (DC) pension funds: A huge burden of complex decision making on individuals; Lack of integration between accumulation and decumulation phases.Provide sustainable income flows (Blake et al., 2008; Financial System Inquiry, 2014): Finance a desired consumption path; Target annuitisation fund (Impavido et al., 2012); Pension fund managers have no liability.

The implicatons of covid-19 pandemic

Abstract Throughout history, the world has faced various types of pandemics that not only threaten human health, but also greatly affect social and economic aspects. Recently the world is suffering from a pandemic, which is caused by the Covid-19 virus that began in Hubei Province, China. Southeast Asia geographically close to the virus outbreak and as a region consisting of a majority of developing countries, SEA’s economic situation will be greatly affected by the spread of this virus. Throughout the Southeast Asian region, ASEAN helping its members by taken various measures and recommendation to counter the spread of the pandemic. Some efforts to stimulate these goals are carried out by eliminating taxes among ASEAN members, provide subsidies in the form of cash assistance for vulnerable parties, moratoriums on loan payments, pension contributions, and cooperate with external partner to deal with the pandemic. The central bank also reduced interest rates, reduced reserve requirements, and purchased government bond. Using qualitative approach and descriptive method, this article will explain and explore about the economic policy in the Southeast Asian region during the Covid-19 pandemic. Keywords: Pandemic; Economic Policy; ASEAN

Public Workers’ Perception towards Contributory Pension Scheme: Evidence from Lagos State, Nigeria

This study examines the perception of public workers towards contributory pension scheme with specific reference to Lagos State, Nigeria. The descriptive research design was adopted, while the simple random sampling technique was employed to select 398 respondents as the sample size for the study. Data analysis was performed with the aid of mean and chi-square. The result reveals that perception of workers towards contributory pension scheme encourages workers to save towards future, is convenient for them in the event of changing jobs, their benefits at retirement will not be affected in the event their employer becomes insolvent, it empowers contributor to choose who administers his/her retirement benefits account and provides the opportunity of enjoying some modicum of pension on retirement. Furthermore, the result reveals that non-remittance of pension contribution into retirement saving account and non-compliance of the pension reform as amended by the government at all levels, are the major challenges facing the successful implementation of the scheme. The study concludes that the contributory pension scheme looks bleak for the sustainability in Nigeria. Therefore, government at all levels should do the needful to ensure the full implementation of the scheme.

Analysis of The Impact of Pension Scheme of State-Owned Companies of China Railways

<p>The purpose of this study was to investigate the factors influencing supplementary pension contribution among employees of China Railway Group Company Limited. Simple random sampling technique was used. A structured questionnaire with close-ended questions was used to solicit data from 421 respondents. Hierarchical multiple linear regression was employed in the analysis of the data. The findings of the study revealed that certain factors such as tax policy and reward system had influences on employees’ decisions to take additional pension schemes besides the mandatory pension schemes. A comfortable retired life of employees depends on the savings made during the days of active service. The study revealed that tax policy positively influenced supplementary pension contribution among employees. Reward system has been considered in many cases as having a positive effect on employee decisions. The findings of the study revealed that reward system positively and significantly influenced supplementary pension contribution among employees. In addition, both tax policy and reward system had influence on employee lifestyle.</p>

Real Estate and Alternative Asset Allocations of U.S. Firms' Defined Benefit Pension Plans

This study examines the role of real estate and alternative assets in the investment portfolio of defined benefit (DB) pension plans offered by U.S. firms for the period 2002 to 201'3 These plans provide a unique reflection of the confluence of regulatory, accounting, and economic changes that have recently taken plance. Results indicate a quarter of our sample plans invest in real estate while more than half invest in alternative assets. Logistic and panel data regression analyses generally indicate that pension plan size, contribution levels, and funding status are significant in explaining the likelihood of and the variance in the allocation of plan assets to real estate and alternative investments.

Conceptualizing Contributory Pension Scheme Implementation and Job Commitment of University Lecturers in Nigeria

<p>This paper examined the concept of contributory pension scheme as it relates to lecturers’ job commitment in the university system. It adopted the Social Exchange Theory by George Casper Homans in 1958 and a review of other scholars’ findings on pension scheme implementation. It established a link between the CPS implementation procedures and the indices of university lecturers’ job commitment. The paper recommended among others that it is important for employees to see clearly the reward process at work. Concrete acts must accompany statements of intent since lecturers have expectations for good pension package after many years of service to the university.</p>

Transitioning to a higher retirement age with exponential and quasi-hyperbolic discounters in mixed economies

Abstract This paper analyses the macroeconomic and welfare effects of a higher retirement age within a dynamic overlapping generations framework, wherein exponential discounting and sophisticated quasi-hyperbolic discounting agents coexist in ‘mixed economies’. The transitional dynamics of economic aggregates depend on the proportion of QHD agents, and the extent to which reducing the social security tax rate mitigates crowding-out effects on savings and enables both lower pension contributions and higher pension benefits. Welfare impacts across agent types and cohorts differ accordingly: QHD agents employ the higher retirement age as a commitment mechanism to mitigate the adverse welfare implications of present-biasedness.

Local Policy Experimentation, Social Learning, and Development of Rural Pension Provision in China

The rural pension system, co-financed by rural residents' contributions and government subsidies, is a remarkable institutional innovation in China. To better understand the establishment and policy design of this system, this article studies the local experimentation of (partly) government-funded new rural pension schemes prior to the national policy guideline issued in 2009. The focus is on the role of social learning as a crucial driving force in this process. Through a process tracing based on in-depth interviews in Daxing of Beijing and Baoji of Shaanxi Province, this article illustrates how local governments struggled to find suitable financing models for rural pensions, and relied primarily on hands-on experimentation and experiences. During the mobilization of participation in the schemes, the repeated and constant interactions between local officials and rural residents promoted a form of mutual learning that contributed to local policy adaptation and rural residents' internalization of the value and basic rules of contributory pension provision. The local experience had a cumulative impact on the ideational reorientation of the central officials regarding the state's financial role in provision. Specifically, the financing model in Baoji created new options that facilitated the reconciliation of a set of different concerns and objectives at the centre, notably fiscal affordability, wide coverage, and modest managerial burden, which, this article argues, was the major reason for the incorporation of this model into the national policy. The article concludes by discussing the implications of the establishment of the rural pension system and its provisions on rural state-society relations in China.

Optimal investment of DC pension plan with two VaR constraints

In this paper, we investigate an optimal investment problem under two value-at-risk (VaR) constraints faced by a defined contribution (DC) pension fund manager. We apply a concavification technique and a Lagrange dual method to solve the problem and derive the closed-form representations of the optimal wealth and portfolio processes in terms of the state price density. Theoretical and numerical results show that the two VaR constraints can significantly impact the distribution of the optimal terminal wealth.

Do mandatory pension contributions hinder innovation? Empirical evidence

This paper empirically investigates the effect of mandatory pension contributions on firm innovation. We find that firms with mandatory contributions experience a decline in their innovation output. This effect is stronger for firms with financial constraints, more short-term institutional investors, higher levels of managerial short-termism. We also document that mandatory pension contributions result in a reduction in firm research and development expenditures and an increase in firm debt-to-asset ratio. Moreover, we report that firms with mandatory contributions increase their alliance activities to pursue innovation with external partners.

Strategic Role of Pension Fund Administrators in Motivating Contributors’ Interests in the Nigerian Pension Scheme

The focus of this research was to determine the strategic role of Pension Fund Administrators (PFAs) in motivating contributors’ interests in the Nigerian pension scheme. Effort was made to ascertain the extent of payment of pension benefits to contributors as and when due and to also ascertain the level of payment of interests and bonuses to the contributors on funds invested as and when due. The study utilized structured questionnaire to obtain data from active Retirement Savings Account (RSA) holders and pensioners based on their perceived interests on pension matters in Nigeria. A total of 168 RSA holders and 149 pensioners were purposively and randomly selected for the study within the South-West region of Nigeria. From the application of the regression technique, the data analysis revealed that prompt payment of pension benefits and contributions by PFAs significantly influence contributors’ motivation in the pension scheme. Also, the result showed that payment of interests and bonuses on pension funds invested has a significant effect on the contributors’ satisfaction with the pension scheme. Therefore, the study recommended that PFAs should devise means to educate the beneficiaries on the modalities for calculating pension allowances so as to improve their customer service initiatives for increased market share, and to regularly update the RSAs of beneficiaries with the interests and other bonuses from pension investments.

Ahorro previsional voluntario en Chile: evidencia y propuestas para la masificación

espanolLas bajas pensiones es un tema de preocupacion global y Chile no es la excepcion. La experiencia internacional muestra que una forma de mejorar la tasa de reemplazo es mediante el ahorro voluntario (APV), muchas veces con enrolamiento automatico y descuelgue voluntario. En este trabajo, por una parte, se hace una descripcion del sistema de pensiones chileno y la evolucion del APV en los ultimos anos. Por otra parte, utilizando datos de la Administradora General de Fondos de BancoEstado, se desarrolla un modelo de Cox (riesgos proporcionales) sobre la persistencia de las cotizaciones voluntarias, de manera de identificar los factores que hacen que una persona deje de cotizar. Se encuentra no solo que el APV puede ser masificado en la poblacion, en tanto mas de la mitad de los ahorrantes tiene ingresos menores a 600 mil pesos, sino que el descuento automatico es el factor mas importante para la persistencia del ahorro, teniendo un riesgo 60% menor de dejar de cotizar respecto de quienes lo hacen mes a mes. Este efecto es mas importante que los niveles de educacion y salario de los ahorrantes, en linea con lo esperado por la economia del comportamiento. Asi, se recomienda potenciar el pilar voluntario en Chile via descuento automatico, ya sea via medios de pago masivos o mediante APV Colectivo con subsidio estatal para el aporte del empleador.. EnglishLow retirement pensions are an issue of global concern, and Chile is not the exception. The international experience shows that one way to improve the replacement rate is through voluntary savings (APV), often with automatic enrollment and voluntary withdrawal. This paper, on one hand, describes the Chilean pension system and the evolution of APV in recent years. On the other hand, using data from BancoEstado’s General Funds Administrator, a Cox model (proportional hazards) over the persistency of the pension contributions is developed in order to identify the factors that cause an individual to stop saving. It is found not only that the APV can be massified in the population, as more than half of the savers in BancoEstado have an income of less than 600 thousand pesos, but also that the automatic discount is the most important factor for savings persistency, with a hazard rate 60% lower than having to save each month. This effect is more important than the effect of education and wages, in line with what is expected by behavioral economics. Thus, it is recommended to strengthen the voluntary pillar in Chile through automatic discount, either through mass payment means or through Collective Voluntary Pensions Savings with State subsidy for the employer’s contribution.

ANALYSIS OF ECONOMIC-FINANCIAL EXPERIENCE OF THE WORLD COUNTRIES IN THE SYSTEM OF PENSION INSURANCE

The purpose of this article is to analyze the experience of pension insurance systems in Europe, Asia, North and South America, Australia. The defining feature is that the existing pension insurance system in Ukraine does not perform its main task properly, since the rate of pension, for the most part, does not make it possible to maintain a decent standard of living for current pensioners. After analyzing the implementation of the pension reform in Ukraine, it should be emphasized that during the twelve-year period after the pension reform in the country there remain a number of unresolved issues regarding the pension provision of citizens, namely: aging of the population, which is one of the main factors that prompt the government to a new stage of reforming the pension system; the presence of arrears on contributions to compulsory state pension insurance; lack of proper differentiation of pension payments; shadow wages; lack of sound financial instruments for investing pension assets; unsatisfactory level of legal and financial awareness of the population in matters of pension provision; lack of interest of employers in financing non-state pension programs for employees, lack of confidence in the pension system of non-state pension funds. Methods. In most countries of the world, the problems of the pension system, same to what we have in our country, arose. But due to pension reform, they achieved successful results. Each country chose its own way of building a pension system based on its own demographic and socioeconomic features. However, despite this, the main task of any pension system is to secure from poverty and provide a pension that could guarantee a decent standard of living for a pensioner. Results. Ukraine is trying to build the pension insurance system, drawing on the best practice of the countries studied. Practical implications. It is found that the most effective and successful model of the pension system is considered to be Chilean, since the country has been using cumulative and voluntary pension systems for a long time, which are priority and allow to resolve the pension of their citizens financially, prudent and efficient investing of pension funds with lower rates of public investment income. The same model was taken as the basis in Peru, Argentina, Colombia and Kazakhstan. Value/originality. Analyzing the pension reforms implemented in Eastern Europe, it should be noted that part of the changes was due to the need to protect pensioners from poverty in the context of a sharp decrease in the rate of pensions because of the reduction of total pension contributions and the inability of the state to finance previous pension obligations. The real way to reduce the financial burden on employers and the state in the context of a solidarity pension system was to develop levels II and III of the pension system. It is noteworthy to study the foreign experience of the Eastern European country, such as Poland, which was one of the first to introduce a compulsory funded pension system.

The Economic Consequences of GASB Financial Statement Disclosure

We examine whether Governmental Accounting Standards Board (GASB) financial statement disclosure influences local governments’ economic decision-making. To do so, we exploit a recent GASB standard that differentially changed the disclosure requirements for pension obligations for county governments. The standard, GASB 68, had no effect on pension economics nor on the annual budget—it only affected whether and how information was presented on GASB financial statements and did so differently depending on the type of pension plan sponsored by the county. Using a broad hand-collected dataset, we document that newly disclosing counties reduced public welfare expenditures, employment, and salary expenses relative to those that had disclosed such information prior to GASB 68. We conduct extensive field research and employ several cross-sectional analyses to conclude that the effects we document are likely driven by increased awareness of the financial costs of pension obligations by newly disclosing counties. More specifically, we find that GASB 68 changed these counties’ perspective of their pension arrangement from a bill (i.e., the county only has to make an annual pension contribution) to a liability (i.e., the county is ultimately responsible for funding the pension deficit), and that this new perspective generated the documented fiscal response.

From the Fringe to the Fore: Labor Unions and Employee Compensation

Conventional wisdom suggests that labor unions raise worker wages, while the newer empirical literature finds only negligible earnings effects. I reconcile this apparent contradiction by arguing that collective bargaining targets fringe benefits. Using U.S. firm-level data from the Bureau of Economic Analysis (BEA) Multinational Enterprise Survey and Compustat, I exploit a regression discontinuity in majority rule union elections to compare changes in employee compensation at firms whose establishment barely won a union election against those that barely lost an election. Following unionization, average employee compensation and employer pension contributions increase, which raises the labor share of compensation.