Pension Risks Research Articles

On the issue of professional pension risks in the Republic of Kazakhstan

This article covers a current topic professional pension provision for those employed under hazardous and difficult working conditions, the international experience of professional pension schemes, and stages in creating one in Kazakhstan. To identify and set compensation for employees who worked under harmful and/or other adverse working conditions, determine employer participation levels in production processes, as well as assess any required capital investments by employers to enhance working conditions.This article presents an in-depth examination of Kazakhstan's existing pension system with respect to occupational risks faced by employees from various sectors of its economy. Additionally, its effectiveness was evaluated within a context of demographic shifts, labor market transformation and an increase in informal sector workers. Recommendations are made for strengthening the pension system to ensure its sustainability and adaptability with changing socio-economic conditions, with comparisons made against international best practices as well as suggestions on integrating them into Kazakhstani society.The authors propose a set of measures aimed at strengthening the professional pension system, such as strengthening its regulatory framework and activating investment activities of pension funds, developing tools to encourage employers to improve working conditions, increasing financial transparency and increasing financial responsibility.

Managing Pension Risks in Public Sector: A Study of Lagos State Government Public Service

Managing Pension Risks in Public Sector: A Study of Lagos State Government Public Service

Operational efficiency evaluation of urban and rural residents' basic pension insurance system by utilizing a picture fuzzy TOPSIS method based on the cumulative prospect theory.

Population aging is the most serious challenge facing the pension insurance system in China in the next few decades. Compared with the employees of civil servants and enterprises and institutions, urban and rural residents are unstable vulnerable groups with less income. In order to deal with the pension risks caused by the growing aging population and solve the security problems of urban and rural residents, our government has carried out a series of constructive works in the pension insurance system: in view of the rural and urban residents, new rural social endowment insurance system and the social endowment insurance system for urban residents have been set up and combined into a unified basic old-age insurance system for urban and rural residents in 2014. With the continuous expansion in the scale of income and expenditure of urban and rural living insurance funds and the size of the insured number, it is of great necessity to evaluate the efficiency of this system. The operational efficiency evaluation of urban and rural residents' basic pension insurance systems is viewed as multi-attribute group decision-making (MAGDM). In this paper, we propose an approach by combining the traditional Technique for Order Preference by Similarity to an Ideal Solution (TOPSIS) with cumulative prospect theory (CPT) which can be widely used with vague information. Thus, the main contribution of this study is as follows: (1) the TOPSIS method is extended by picture fuzzy sets (PFSs) with unknown weight information; (2) entropy method to obtain the original weights of attributes; (3) the picture fuzzy-CPT-TOPSIS (PF-CPT-TOPSIS) method is used to deal with the MAGDM problems under PFSs; (4) a numerical instance for operational efficiency evaluation of urban and rural residents' basic pension insurance systems is proposed to testify the effectiveness of new method; and (5) some comparative studies are provided to give effect to the rationality of PF-CPT-TOPSIS approach.

Healthcare attendance styles among long-term unemployed people with substance-related and mood disorders

BackgroundBoth increased and decreased health service usage and unmet care needs are more prevalent among unemployed people than in the general population. Study designThis study investigates the associations of substance-related and mood disorders among long-term unemployed people with styles of healthcare attendance in Finland. MethodsThe study material consisted of the health register information on 498 long-term unemployed people in a project screening for work disabilities. The data were analysed by mixed methods: qualitative typological analysis was applied to identify differential healthcare attendance styles, and the associations of the obtained styles with mental health disorders were analysed quantitatively by multinomial logistic regression. ResultsThree styles, characterized as smooth, faltering and marginalized, were identified. Compared with participants with the smooth attendance style without mental disorders, those with the faltering style had tenfold relative risk for substance-related disorder and fourfold relative risk for mood disorder. Those with the marginalized style had fivefold relative risk for substance-related disorder and twofold relative risk for mood disorder. Adjusting for background characteristics did not alter the statistical significance of substance-related disorder. In the case of mood disorders, the statistical significance persisted throughout the adjustments in the faltering style. ConclusionDysfunctional use of health services is more common among people with substance-related or mood disorders, who are at risk of drifting towards long-term unemployment and work disabilities. The early detection of those with faltering or marginalized healthcare attendance style may prevent prolonged unemployment, enable rehabilitation measures and reduce the risk of disability pensions.

Pension Risks and Aversion of Chinese Peasants: : An Empirical Study based on the View of Livelihood Capital

Pension Risks and Aversion of Chinese Peasants: : An Empirical Study based on the View of Livelihood Capital

Sustainability of the Pension System, Risks and Opportunities

All other things being equal by 2060 out of 10 of the working age population 6 pensioners will be accounted for. This does constitute a risk for the sustainability of pensions. Our study has analysed the most recent data on demographics, economy, employment, and its underlying factors, as well as the expected development of the figures of the pension fund. Our findings point to that the shrinking of the population of women of childbearing age will result in a constant decrease of birth rates even by a modest increase in fertility rates. Therefore, family policy measures - being indispensable - are of their own insufficient to mitigate the economic and pension risks. Due to its conjunctural nature economic growth can only temporarily mitigate the risks. On the other hand, the extension of the labour market activity of elderly people can set back the increase in pension costs with well predictable efficiency. Means to this end can include promoting activity at old ages, raising retirement ages, preserving physical and mental well-being and employability, as well as spreading the culture of self-reliance.

Pension Privatisation: Benefits and Costs

During the last 10 years, many OECD countries introduced reforms which included automatic enrolment or mandatory participation in privately managed pension schemes. The current article aims to reveal the benefits and costs of privately managed pension schemes. The article uses a study of pension schemes’ bylaws in Israel to study the degree to which the shift to privately operated DC schemes results in the transfer of risk from capital to labour and in the entrenchment of gender and income inequalities. The article shows that the shift of pension provision from defined benefit (DB) to defined contribution (DC) entails a significant shift of risk from capital to labour. Moreover, separately from the DB to DC shift, moving from public management to private management increases employees’ pension risks. Lastly, the paper shows that the combination of the shifts from DB to DC and from public to private management involves a shift in governance, which exposes pension scheme members to a high likelihood of lower returns as well as to gender and income inequalities.

Pension Privatisation: Benefits and Costs

Abstract During the last 10 years, many OECD countries introduced reforms which included automatic enrolment or mandatory participation in privately managed pension schemes. The current article aims to reveal the benefits and costs of privately managed pension schemes. The article uses a study of pension schemes’ bylaws in Israel to study the degree to which the shift to privately operated DC schemes results in the transfer of risk from capital to labour and in the entrenchment of gender and income inequalities. The article shows that the shift of pension provision from defined benefit (DB) to defined contribution (DC) entails a significant shift of risk from capital to labour. Moreover, separately from the DB to DC shift, moving from public management to private management increases employees’ pension risks. Lastly, the paper shows that the combination of the shifts from DB to DC and from public to private management involves a shift in governance, which exposes pension scheme members to a high likelihood of lower returns as well as to gender and income inequalities.

Actuarial Evaluation of Pension Risks of Russia: from Theory to Practice

The article discusses the origins of the development of pension systems in the world, shows the causes of the emergence of various models of public pension provision. We pay a particular attention to the history of the formation of the Russian pension system, and analyse the stages and causes of modern reform. From the position of modern legislation, we systemise the forms, types of pension provision and pension insurance in the Russian Federation from the point of view of the sources of financing and subjects of pension relations. The authors have defined the concept of “actuarial evaluation†from the point of view of the process and system approach. We have revealed the content of the pension risk category, as well as classified the pension risks by the spheres of origin. The authors have developed the methodology of actuarial estimation of the risks of the pension system classified by different criteria: demographic, economic, financial, labor risks. The proposed methodological approach to the evaluation of pension risks is based on the comprehensive assessment of socio-economic indicators and the identification of dependencies between socio-demographic and economic processes in the pension system and economy of the country. The authors have tested the developed tools on the actuarial estimation of the pension risks of the Russian Federation. The article presents the results of calculations and identifies critical risks for the Russian pension system. We have proved that stagnation processes in the economy and a high share of the shadow economy represent the greatest threat to the Russian pension system in the short term, whereas, the aging of the population and the increase in life expectancy — in the long term.

Экономические механизмы защиты населения от пенсионных рисков как инструмент социально-экономического развития региона

Экономические механизмы защиты населения от пенсионных рисков как инструмент социально-экономического развития региона

The unseen pension risks of TUPE

The regulations and guidance around pensions in TUPE arrangements contain different provisions and are applicable to different public bodies. It is important to understand the differences, says Jane Marshall

The Theoretical Aspect of Pension Reforms, Labor Market and Financial Sector Reforms

Abstract The Republic of Macedonia has a good pension system for disability insurance, which is similar in some european countries with more traditional pension system, but this system works in the defined pension regime. The pension system has functioned and functions based on generational solidarity which means that insured persons who are employed pay the pensions for current pensioners hoping that in the future individuals or employees insured and registered in the Invalidity Pension Fund of Republic of Macedonia will pay also for their pensions. The pension system in Macedonia has been applied for almost 50 years but has had some legislative changes and especially in labor legislative, always bearing in mind that these changes have not been created random but they have been created for efficiency in the area of disability pension reforms. Socio-economic changes have affected the system not to be effective and also efficient and adaptable to the population. In early transition the capital market has significantly affected the number of enterprises that have worked with loss and in the end policyholders have finished as redundancy and enterprises have been led to the bankruptcy stage, in the time of transition this was the reason for stagnation because the number of insured people and employees was greater than the number of retirees. All these problems has happened in 1993 and also at same time there were changes in pension and disability insurance law of RM. In early 1997, the new legal changes brought positive effect for the new reform, but what is the main problem of disability pension is that their life expectancy is very short, because of many new laws and obligations that never have foreseen potential risks that may arise in the future. With all these destabilization of the pension system is expected that in 2020 the financial situation of pensions to be stabilized , because an employee who has a pension insurance will fund a pensioner, costs for pensioners will rise and GDP will reach up to 13%. This analysis shows that the RM will not reach to pay pensions for future pensioners according to this law and this phenomenon represents a financial destabilization. These are the reasons for pension and RM pension system reforms for this purpose in 2002 enters into force the law of financing required capital for pensions fund. Keywords: Reforms of pension system, financial capital, minimum risk of pensions, Republic of Macedonia

Research on Endowment Rural Only Child

Family planning for 30 years, China produced a huge number of only child groups, and the first generation of only children of their parents, about to enter old age. Reverse pyramid’s only child family more prone to pension risks, especially in rural areas, family size, traditional family pension function gradually weakened, and some congenital vulnerable child families, making life care and spiritual endowment involved consolation seemed powerless. In this paper, a comprehensive study by the current existing pension issues.

‘Ticking Time Bomb: The Hidden Pension Deficit’ – Critical Study of Post Crisis Reforms and Financial Viability of Current Pension System

Management of pension schemes has always been a difficult task for governments and the challenges that governments are facing today are growing faster than many countries anticipated. Pension plans have evolved overtime as public and private sector schemes slowly switching to PAYG system of funding and the uncertainty over current contributors’ future is growing. However, the recent financial crisis turned attention towards this hidden deficit of the countries where pension funds around the world lost significant amount of their value and the mounting pressure forced the policy makers to take actions to address this issue which they did by suspending and scaling down pension privatisation which once was proposed by World Bank and supported by countries around the world specially in Eastern Europe to answer the funding problems of pension plans. Recent studies such as Drahokoupil and Domonkos (2013) and Orenstein (2014) among others have analysed the impact of financial crisis on pension funds and the role played by private pensions during that period but were unable to find any significant differences between public and private pensions in terms of returns and risks. These studies raise questions on the rationale behind the recent reforms that not only significantly reduced the funding through private pension plans but the initiatives such as UK government allowing pensioners to take their pension savings as single cash payment instead of buying annuity does not seem like a insightful step that can minimize the pension deficit but will result in extra cash burden on treasury (Flood, 2014). Many European countries such as Hungary, Latvia and Poland completely abolished private pensions as a response to resolve the problem of pension deficit. However, on comparing the portfolios of public and private pensions during the period of financial crash, analysts found that both were holding risky assets and due to the market turmoil, the fund lost their value but question of why only private pension funds were penalized is still far from answered that can make economic and financial reasoning. Resulting reforms imposes constraints and stringent requirement for pension funds where regulators in US and Europe have made attempts to prevent the use of financial derivatives to hedge the portfolio risk. The case for these regulations in reducing risk is debatable while some supported, other criticised as it leads to increased costs and impedes fund growth. These also resulting in misalignment of interests as assets managers are forced to focus on short-term volatility rather than sustainable returns (Randle and Rudolph, 2014). There are many reasons that have created this enormous pension deficit such as political, social, demographical, economic and financial. But some risk can be managed easily than others, as most of the literature focuses on the impact of political and social policies on pension plans, the discussion in this paper is on financial aspect of the problem and attempts to find solutions to manage the pension risks through financial markets. While many governments such as Detroit city sunk down the pension deficit abyss and defaulted on their obligations, Norwegian pension fund and Australian superannuation fund have emerged as ideal models that can be followed by countries facing pension crisis as the longer they take to react the deeper they sunk in to the deficit hole. The aim of this discussion is to: 1) gain insights into the underfunding problem of pension funds and the impact of financial crisis on pension liabilities and how it has amplified the pension risks and liabilities, with underfunding and risk mitigation as focal point. 2) Critically discuss post crisis pension reforms and how they are likely to resolve the problems. The focus will be on risks associated with private and public pension plans. 3) While regulatory law is not the main focus of this discussion but there are some regulations that directly impact the financial performance of the pension funds such as imposing constraints on investment of funds. Therefore the discussion follows the extent to which fed should intervene, and attention will also be drawn on inconsistent and biased regulations. 4) For sustainable pension plans strategies, Australian superannuation and Norway’s pension funds have been discussed in detail including their investment strategies, risk management techniques and supervision in order to find solutions that can be used by other countries such as US and UK.

Managing Pension Risks: A Corporate Finance Perspective

Managing Pension Risks: A Corporate Finance Perspective

Managing Pension Risks: A Corporate Finance Perspective

Defined benefit (DB) pension plans of both U.S. and European companies are significantly underfunded because of the low interest rate environment and prior decisions to invest heavily in equities. Additional contributions and the recovery of stock markets since the end of the crisis have helped a bit but pension underfunding remains significant. Pension underfunding has substantial corporate finance implications. The authors show that companies with large pension deficits have historically delivered weaker share price performance than their peers and also trade at lower valuation multiples. Large deficits also reduce financial flexibility, increase financial risk, particularly in downside economic scenarios, and contribute to greater stock price volatility and a higher cost of capital.The authors argue that the optimal approach to managing DB pension risks relates to the risk tolerance of specific companies and their short and long‐term strategic and financial priorities. Financial executives should consider the follow pension strategies: Voluntary Pension Contributions: Funding the pension gap by issuing new debt or equity can provide valuation and capital structure benefits—and in many cases is both NPV‐positive and EPS‐accretive. The authors show that investors have reacted favorably to both debt‐ and equity‐financed contributions. Plan de‐risking: Shifting the pension plan's assets from equity to fixed income has become an increasingly popular approach. The primary purpose of pension assets is to fund pension liabilities while limiting risk to the operating company. The pension plan should not be viewed or run as a profit center. Plan Restructuring: Companies should also consider alternatives such as terminating and freezing plans, paying lump sums, and changing accounting reporting.

Immigrants in the Old-Age Pension System: The Case of Sweden

The article investigates incomes and especially state pensions 2008 among elderly immigrants who arrived in Sweden before 1970. At age 70 and above, the level of state old-age pension for immigrant men was nearly the same and for immigrant women somewhat higher than for natives with similar characteristics. At age 65–66 the state pension was lower for immigrants than for their native counterparts. The differences in pensions for immigrants of different ages are probably due to changed rules in the Swedish state old-age pension system from 2003. The new rules have hit different age groups in different ways. The gaps are partially levelled out when other incomes are included. The extent to which levelling occurs varies greatly between different immigrant groups. For immigrants who have arrived during the last decades, the future state old-age pension outcomes are expected to be worse. Policy Implications The Swedish Pensions Agency should set up a register of pensions from abroad. This will tell us to what extent old-age pensions from the home country compensate for low old-age pensions from the Swedish system. Better integration on the labour market is a powerful measure for reducing the risk of future low pensions among immigrants. This is a challenge for Swedish integration policy. To what extent can other parts of the Swedish welfare system in the future compensate individuals with low old-age pensions?

Work and health among immigrants and native Swedes 1990–2008: a register-based study on hospitalization for common potentially work-related disorders, disability pension and mortality

BackgroundThere are many immigrants in the Swedish workforce, but knowledge of their general and work-related health is limited. The aim of this register-based study was to explore whether documented migrant residents in Sweden have a different health status regarding receipt of a disability pension, mortality and hospitalization for lung, heart, psychiatric, and musculoskeletal disorders compared with the native population, and if there were variations in relation to sex, geographical origin, position on the labor market, and time since first immigration.MethodsThis study included migrants to Sweden since 1960 who were 28–47 years old in 1990, and included 243 860 individuals. The comparison group comprised a random sample of 859 653 native Swedes. These cohorts were followed from 1991 to 2008 in national registers. The immigrants were divided into four groups based on geographic origin. Hazard ratios for men and women from different geographic origins and with different employment status were analyzed separately for the six outcomes, with adjustment for age, education level, and income. The influence of length of residence in Sweden was analyzed separately.ResultsNordic immigrants had increased risks for all investigated outcomes while most other groups had equal or lower risks for those outcomes than the Swedes. The lowest HRs were found in the EU 15+ group (from western Europe, North America, Australia and New Zealand). All groups, except Nordic immigrants, had lower risk of mortality, but all had higher risk of disability pension receipt compared with native Swedes. Unemployed non-Nordic men displayed equal or lower HRs for most outcomes, except disability pension receipt, compared with unemployed Swedish men. A longer time since first immigration improved the health status of men, while women showed opposite results.ConclusionsEmployment status and length of residence are important factors for health. The contradictory results of low mortality and high disability pension risks need more attention. There is great potential to increase the knowledge in this field in Sweden, because of the high quality registers.

Pension Risk, Governance and CFO Liability

Properly identifying, measuring and mitigating pension risks continues to be a critical element of fiduciary governance. The complexity and ongoing nature of the risk management process is sometimes overlooked as less important than realising a particular rate of return. Recent market volatility, large funding deficits and pressures from creditors, shareholders, rating agencies and plan participants make it harder for pension plan fiduciaries to avoid the adoption of some type of pro-active risk control strategy that effectively integrates asset and liability economics. At a time of great uncertainty, chief financial officers (CFOs) are increasingly being asked to shoulder the burden of making pension-related funding decisions that have the potential to materially and adversely affect plan participants, shareholders and creditors. As a result, the CFO is exposed to fiduciary liability, career risk and the economic consequences of an outcome with enterprise impact.

Psychological distress and risk of long-term disability: population-based longitudinal study

BackgroundCommon mental disorders are known to cause long-term disability, although not much is known about long-term consequences of milder forms of psychological distress.ObjectiveTo investigate the association between increasing levels of...