Pension Gap Research Articles

HR File: Closing the gender pension gap

The gender pension gap currently exceeds the gender pay gap by some margin

Gender Gap in Pension Income: Cross-Country Analysis and Role of Gender Attitudes

The aim of this paper is to study the gender pension gap in Europe based on the newest EU-SILC data from the 2018 wave. The contribution of the paper is twofold. First, it provides evidence on factors shaping the gender pension gap in a large number of EU countries. Second, it analyses the relationship between the pension gap and: (1) the coverage of occupational (second pillar) pensions and (2) gender attitudes. The main factor contributing to gender inequality in pension income is the number of years in employment. The influence of tertiary education is in the direction of increasing the gap, while the effect is the opposite when the hourly labor income gap is considered. The higher coverage of occupational pensions corresponds to a higher gender pension gap. This implies that the privatization of pension plans can lead to the conversion of a wage gap into a pension income gap and reinforces women’s disadvantage after retirement. In addition, a positive relationship is observed between unexplained portions of the pension income gap and the labor income gap. This could justify the hypothesis that unexplained portions are formed by the same factors persistent over time. One such factor could be gender norms; it has been found that countries with more gender equality support have lower unexplained portions of the labor income and pension gaps.

Gender pension gaps along the distribution: An application to the French case

AbstractIn this article we estimate the relative contributions to the gender pension gap of career duration and income earned at different points along the pension income distribution, as well as the role played by minimum pensions and other partly or wholly non-contributory policies in reducing this gap. Our research covers all retirees in France in 2012 employed in the public or private sector at least once in their lifetimes. We first highlight that at every point in the distribution, the gender pension gap is wider for private-sector retirees than for those in the public sector. This is because public sector careers are less fragmented and because the calculation of the public sector reference wage does not penalize career interruptions so heavily. This relative advantage of women in the public sector is probably an additional factor explaining their over-representation in this sector. Applying the decomposition method proposed by Firpo et al. (2007, 2009), we show that composition differences in the gender pension gap are essentially due to differences in contribution periods and wages, with a smaller effect of career duration in the public sector than in the private. In the first deciles, the gap can be attributed largely to differences in career duration. This effect gradually weakens, and differences in the reference wage become the main explanation. We also show that minimum contributory pensions play an extremely important role in limiting the gender pension gap in the first deciles, essentially in the private sector. Last, we show that in all cases the unexplained share of the pension gap is substantial only at the bottom of the distribution and, to a lesser extent, in the top decile. The unexplained share is generally smaller than the explained one and favours men.

The Motherhood Pension Gap in a Defined Contribution Pension Scheme—the Case of Poland

A gender gap in pensions has recently been discussed in the context of non-discrimination and the sustainability of pension systems. Such systems in Europe are evolving towards strengthening the role of individual contributions from periods of paid work. Among other factors, the women’s pension gap is affected by interruptions in employment arising from care responsibilities. The purpose of this article is to measure the pension gap associated with having children in defined contribution pension systems. Using financial mathematics, the retirement capital of a childless woman (without breaks in work) was determined and compared with mothers of 1–4 children. The results indicate that the motherhood pension gap is approximately 4.5%–9.5%, 7.5%–15%, 9%–20%, and 12.5%–25% for mothers of 1, 2, 3, and 4 children, respectively. Measuring these individual gaps allows the cost of investing in children to be estimated. Significant for systemic and individual decisions is that the gap size is highest by the first and the second child, however the decision about the third child—relevant to the demography as ensuring the generational replacement—means the whole pension gap could rise to 20%. This could help support a policy of counteracting adverse demographic trends in fertility rates through the building of socially sustainable pensions schemes. In terms of future research, it forms the basis for building a gap measurement model that takes into account various drivers of the gender gap.

Feedback analysis of population, economy and pension: Moderate scale of China’s pension strategic reserve

This paper puts the population, economy and pension into a unified framework, analyzes the interactive feedback mechanism between them, and builds a system dynamics model to explore the moderate scale of China’s pension strategic reserve from the following three perspectives: whether it can resist the pension payment crisis in future according to the current growth rate; if the pension gap is completely filled by the reserve, what size of the reserve needs to reach; a moderate range of the reserve when local governments are jointly responsible for filling the gap. The empirical research shows: the reserve cannot resist the pension payment crisis; the reserve needs to reach 54.21 trillion RMB before the gap appears, under the condition of fully filling the gap; the reserve needs to reach the range of 19.96 trillion to 39.51 trillion RMB before the gap appears with the participation of local governments.

Pracownicze plany kapitałowe jako mechanizm poprawy adekwatności systemu emerytalnego w Polsce

Objective: The article assesses the impact of employee capital plans (ECP) on the adequacy of pensions in Poland. On the basis of three dimensions of adequacy, the following research questions were formulated: To what extent will ECP affect the growth of future replacement rates in the Polish pension system? Will ECP affect the reduction of poverty of the elderly people in Poland? Will ECP reduce the gender pension gap? An attempt to provide comprehensive answers to these questions is the specific objective of the study.Research Design & Methods: The research methods used include meta-analysis of previous studies, statistical analysis of data published by public institutions, and the analysis of law from an economic perspective. Conclusions are based on inductive reasoning based on the synthesis of the results of the individual research methods.Findings: It is not clear from the research if introducing ECP improves the income adequacy of the Polish pension system, though it may do so narrowly, by smoothing consumption in individual terms. However, taking into account the multidimensional approach to the adequacy of pensions, this solution has proven ineffective. Specifically, ECPs do not contribute to reducing the scale of poverty among pensioners or eliminating gender inequalities.Implications / Recommendations: ECPs should be treated as an instrument for improving the amount of future retirement benefits for a part of society, and not as a tool to effectively improve the multi-dimensional income adequacy of the Polish pension system.Contribution: Examination and assessment of the impact of introducing ECPs on the income adequacy of the Polish pension system.

The Pan-European Pension Product Regulation: A Huge Opportunity for the Luxembourg Fund Industry

Currently, there is a dynamic and ongoing improvement in life expectancies that is not accounted for in pension systems designed to provide financial security in retirement. All over Europe, there are currently employment-based (2nd pillar) pension funds and first pillar pay-as-you-go (PAYG) state pensions systems that are facing huge funding deficits as a result of that. Recently both the EU parliament and the EU Council took their stance on the introduction of an European legal framework for Pan-European Personal Pensions (“PEPP”) an “European 401(k) account” that may prospectively be provided by, amongst others, banks, fund managers, and insurance companies. The introduction of the PEPP could potentially be a solution to mitigate the growing challenge of this so-called “pension gap”, i.e. the gap in savings most people have to ensure they have a good standard of living in retirement. Over the next months the EU parliament and EU Council will be exchanging on how to combine their perspectives in view of a final vote for the introduction of a Pan-European Pension Product Regulation (“PEPPR”). In anticipating a final vote, this contribution discusses the huge opportunity that the introduction of a PEPPR offers to the Luxembourg fund industry. For that purpose, this contribution first provides an overview of the PEPP as a “wrapper (Fund) product”. This article then discusses the PEPP (product) passport and the PEPPR governance provisions (intermediary, product and sales regulation) applicable to PEPP providers, distributors and depositaries. It continues by discussing the opportunities for the Luxembourg fund industry and then concludes.

Invisible Scars or Open Wounds? The Role of Mid-career Income for the Gender Pension Gap in Sweden.

This study investigates the importance of mid-career income for the gender pension gap and psychological scarring effects of low income earlier in life. More specifically we analyse whether women's typically less stable mid-life careers also affect outcomes in late careers and in retirement. Swedish income register data from 1990, 2009, and 2015 was linked to the “HEalth, Ageing, and Retirement Transitions in Sweden” survey. The gender pension gap of 966 retirees and worries about pension income of 2,723 older workers between the age of 60 and 66 years were investigated. Blinder-Oaxaca decompositions were applied to analyse the gender pension gap and linear regressions were used for the analysis of financial worries. Results show that gender differences in mid-career income play a stronger role for the gender pension gap than late career income. Mid-career income is furthermore related to higher worries about pension income and accounts for observed gender differences. Our findings demonstrate that gender gaps in mid-career income can be regarded as an open wound with visible negative effects in older ages. The reformed pension system in Sweden may potentially contribute to an even greater gender gap in pensions.

Assessment of the Financial Sustainability of China’s New Rural Pension Plan: Does the Demographic Policy Reform Matter?

Rural China is experiencing a rapid aging process caused by low fertility and large-scale rural-to-urban migration, which will place an increasing payment burden on the rural pension plan. To allay the negative impact of the aging transition, China has recently carried out a demographic policy reform, replacing the famous one-child policy with the two-child policy. This paper evaluates the impacts of the demographic policy reform on the financial sustainability of China’s New Rural Pension Plan (NRPP). By applying the cohort component population projection method and building actuarial models, the solvency sustainability of the NRPP between 2019 and 2080 is estimated under six demographic policy scenarios, followed by sensitivity analysis. The simulation results show that under the one-child policy, the current and the accumulated pension fund would run deficits in 2030 and 2042, and then the pension deficits would expand rapidly. The two-child policy would relieve the pension pressure moderately before 2075, but thereafter, the pension deficits would become much worse. Sensitivity analysis of a series of demographics and pension parameters on the financial sustainability of the NRPP are displayed. On average, the long-term pension gap may not be avoided for the NRPP, regardless of raising the contribution rate, delaying the retirement age, or encouraging people to have more children.

MODELING A FLEXIBLE RETIREMENT AGE TO NARROW PENSION GAP: THE CASE OF CHINA

With the relatively fixed retirement age, the dramatic increase in life expectancy and the sharp decline in fertility have caused a serious aging problem and an unsustainable pension crisis. It is therefore necessary to design flexible retirement benefits rules that consider life expectancy. By introducing the lifetime utility optimization model, the closed-form solution for the flexible retirement age is obtained. Pension benefits incentive strategies are constructed to encourage contributors to choose a retirement age that is beneficial toward narrowing the pension gap. The empirical studies show that China will face a serious pension gap in the future if the current statutory retirement age is not adjusted. If the retirement age is delayed according to life expectancy, the future pension gap will be greatly reduced.

Evaluation on the Sustainability of Urban Public Pension System in China

Against the background of population aging and economic downturn, the sustainability of pension systems has aroused great concern for governments across the world. To better reflect the pressure of pension payments in the changing context, the paper aims to forecast the annual pension gap of the public pension system for urban employees in China. By the use of Cohort-component population projections and stochastic projection models, the distribution of flow-based annual pension gap in the next fifty years are estimated under basic assumptions. The results show that the pension gap continues to exist from 2017 and keeps expanding until 2070 without any policy reform. Sensitivity analyses of demographics and various combinations of policy parameters on the distribution of future pension gaps are displayed. Wider pension coverage with lower policy threshold is more likely to face larger long-term pension gap.

Financialisation meets collectivisation: occupational pensions in Denmark, the Netherlands and Sweden

ABSTRACTThis paper analyses three cases where unions and employers have embraced financialisation in occupational pension provision. The widespread use of funded occupational pensions in Denmark, the Netherlands and Sweden is rooted in social partner agreement that collectively organised, capital funded pensions can be harnessed to generate secure income. External funding (legal separation of pension reserves from the employer) and administration were key elements in strategies to provide secure occupational pensions. The introduction of funded occupational pensions took place in the context of meagre and/or incomplete statutory provision and before the expansion of generous basic pension coverage starting in the 1930s. This sequencing had a ‘crowding in’ effect, because well-paid workers sought collective solutions to their pension gap. Over time, these arrangements came to encompass nearly the entire labour market. Unions and employers have developed distinctive strategies for limiting investment risks, limiting the involvement of private financial actors, and ensuring that the interests of plan participants and investment managers are aligned.

Is There a Child Penalty in Pensions? The Role of Caregiver Credits in the French Retirement System.

The effect of motherhood on women's labour supply has been the focus of a large body of economic literature over the last decades. Since the mid-1990s, increasing attention has been paid to the "family pay gap" or the "motherhood wage gap", i.e., the differential in wages between women with and without children. As for the long-term effects of children on pension entitlements, the empirical evidence is limited. Nevertheless, different countries have introduced pension caregiver credits into their pension systems in order to compensate parents-especially mothers-for the impact that children can have on their careers and, ultimately, on their retirement benefits. Whether or not these caregiver credits achieve this objective is still an unresolved issue. We deal with this question in the French case, as the French pension system includes the widest range of caregiver credits compared to other countries. We first compute the family pension gap at given ages for women born between 1950 and 1966, initially while ignoring caregiver credits. This gap increases with the number of children. We then show that caregiver credits do fulfil their role of compensating women for the impact of children on their pension entitlements. Taking these benefits into account offsets almost completely the difference in pension entitlements among women, whatever the number of children. For men, children have almost no impact on their pension entitlements, and caregiver credits play a minor role with the one exception that they favour the fathers of at least three children.

An attempt to overcome the pension gap: the bonus for children in Chile

As a result of the pension reform approved in Chile in 2008, the child allowance, which appears as a measure tending to alleviate the existing gap in the Chilean pension system, is the object of study of this work, which is why analyze the requirements for beneficiaries to access this benefit, the method for its quantification and its form of payment, as well as the effects it causes on the pension gap.

The Gender Pension Gap in Germany

In this short study, we quantify the gender pension gap in Germany and examine how much more women would have to save for retirement to close it. The gender pension gap is first computed as an average across all employees and then split up into various age cohorts and occupations. Based on a broad database on wage income obtained from the Institute of Employment Research (IAB), to which all German businesses have to report, we estimate each employee’s statutory pension entitlements and find that the gender pension gap in Germany amounts on average to 26 %. While we do not observe a significant gender pension gap for employees below 35 years of age, the gender pension gap gets larger for older age cohorts. We argue that the decision to start a family is the most likely explanation for this pattern. As female labor force participation reduces drastically after giving birth, and never fully recuperates, labor income decreases and so do stat-utory pension entitlements of women. The gender pension gap is lower, and sometimes even negative for occupations where salaries are heavily regulated (for example, municipal clerks) and for occupations that are predominantly performed by women (for example, child care workers). It increases for occupations where sala-ries depend more on employees’ negotiation skills. We also compute how the gender pension gap can be closed, i.e., how much more women would have to save to make sure that they have the same pension payments (supplemented by their savings) than men upon retirement. We find that in most cases, the additional savings amount needed makes only up for a small fraction of women’s annual income, ranging between 1-2% for most age groups and occupations.

The Italian Pension Gap: A Stochastic Optimal Control Approach

We study the gap between the state pension provided by the Italian pension system pre-Dini reform and post-Dini reform. The goal is to fill the gap between the old and the new pension by joining a defined contribution pension scheme and adopting an optimal investment strategy that is target-based. We find that it is possible to cover, at least partially, this gap with the additional income of the pension scheme, especially in the presence of late retirement and in the presence of stagnant careers. Workers with dynamic careers and workers who retire early are those who are most penalised by the reform. Results are intuitive and in line with previous studies on the subject.

The Gender Pension Gap in China

ABSTRACTChina has had a large gender gap in labor force participation, sectors of employment, and earnings. This study shows that disadvantages in the labor market for women are the primary drivers of the gender pension gap. Among people age 60 and older, women receive about half of the amount of men's social pensions. Using the 2013 wave of China Health and Retirement Longitudinal Study (CHARLS) and the CHARLS Life History Survey of 2014, this contribution has three main findings. First, about three-quarters of the deficit in women's pensions is explained by women's lower likelihood of receiving occupational pensions, and one-third is due to smaller benefits when they do receive them. Second, the gender deficit in receiving an occupational pension can be explained by education level and employment sector. Third, among pension recipients, nearly one-third of the gender benefit gap is explained by women's fewer years of employment and lower salaries.

Privatisierung und Vermarktlichung der Altersvorsorge: Eingetrübte Aussichten des deutschen Mehrsäulenmodells

WSI-Mitteilungen , Seite 468 - 475

An Empirical Study on the Health of Retirement to the Working Population—Based on China Health and Retirement Longitudinal Study

With the aging of Chinese intensified, the demographic dividend is gradually less, the phenomenon of large pension gap, delay retirement to discuss fiercer. Most of the articles on the study of retirement problems, from a healthy perspective are often neglected on the basis of combing the theory of the relationship between retirement with health and the literature on the impact of retirement on health from the perspective of health empirical analysis on the effect of retirement for the elderly health. In this paper, using the China Health and Retirement Longitudinal Study (CHARLS), mandatory retirement ages as instrumental variable, to study the effect of retirement for the elderly health by fuzzy regression discontinuity design (FRD). The main conclusions of this paper: First, Chinese compulsory retirement system has a significant negative impact on male health; there is no impact on female health. Second, the impact of retirement on men is mainly caused by the impact of male mental health; retirement will increase the degree of depression in men and lead to mental health decline. Thirdly, based on men’s health behavior, time use and medical use, we found that retirement does not improve the utilization medical of male; it also does not change men smoking habits and their physical exercise, but retirement will change male drinking habits, and increase their leisure time. Finally, this paper raises corresponding policy recommendations to improve personal health and better implementation of delayed retirement policies.

Assessment of retirement benefits in the European countries

The aim of the research presented in the article is to characterize retired persons who receive benefits ensuring the maintenance of existing living conditions. The research was conducted with the use of selected data mining methods, such as classification trees, multivariate correspondence and cluster analysis. The paper includes socio-demographic and economic factors, i.e. sex, household type, retirement age, health status and type of pension scheme. The research was conducted on the basis of data from the project ”Share 50+ in Europe”. The presented results allow to identify beneficiary who is not threatened by the so-called pension gap which means the inability to maintain an earlier standard of living due to insufficient retirement benefits.