Sustainable Pension Research Articles

Financial impact of pandemics on pension sustainability: an application for Spain

AbstractEpidemiologists are warning that the next pandemic is almost around the corner. As we have seen during the COVID-19 pandemic, the death toll was at the highest for over 60th, transforming the population pyramids. In times of pandemics, two effects on sustainability of the pay-as-you-go (PAYG) pension scheme go in different directions: the increase in old-age mortality (leading to a decrease in pension spending) and the increase in unemployment (leading to a decline in income from contributions). In this paper, we investigate the long-term effects of pandemics on the financial sustainability of PAYG pension schemes, taking into account changes in both mortality and unemployment factors. Using functional data analysis we develop projections of population pyramids and allow for anticipated mortality jumps as a result of future pandemics. An application is carried out using mortality and fertility data from Spain. Given some plausible assumptions, our findings indicate, firstly, that the financial sustainability of the Spanish pension system is compromised. Secondly, in the event of a pandemic, we observe that financial sustainability is primarily driven by the mortality effect—resulting in a decrease in pension expenditure—while the impact of unemployment is almost negligible.

Reflections on the Challenges of Old-age Security and Policy Options for an Ageing Population

The global phenomenon of population aging is advancing at an unprecedented pace, particularly in China, where the accelerating aging process poses substantial challenges to the existing pension security system. The issue of elderly care has emerged as a critical topic in the realms of society, economy, and politics, impacting national sustainability and social stability. The challenges brought about by an aging society extend beyond the pressures of pension payments and insufficient elderly care services, encompassing risks related to funding sources and management, as well as concerns over the fairness of the security system. In the face of these challenges, there is an urgent need to optimize pension policies, advance pension system reforms, enhance the elderly care service system, and strengthen the coordination between social and medical security to construct a more equitable and sustainable pension security framework. Measures must be collaboratively advanced through top-level institutional design, policy execution efficiency, and societal involvement to provide robust support in addressing the challenges of aging. This paper will delve into the impact of population aging on the pension security system, analyze the current state and shortcomings of policies, and propose strategies to enhance the system's resilience, offering insights and recommendations for strengthening the pension security framework.

Unveiling the Future of Retirement: The Opportunities and Obstacles in Modernizing Pension Schemes Across Africa

This systematic review offers a holistic understanding of the prospects, challenges, and best practices in modernizing pension schemes across Africa. With a rising aging population, pension schemes are vital for financial security, societal well-being, and poverty alleviation. The study addresses literature gaps by exploring economic implications, assessing elderly frailty, and investigating quality of life impacts. Following PRISMA guidelines and using the PICOS framework, multiple electronic databases were searched for papers published between February 2010 and April 2022, focusing on African pension schemes. Thirty-one studies met the eligibility criteria and were included in the analysis. Findings indicate that while pension schemes improve mental health, food security, and societal structures, they face challenges such as data scarcity, financial sustainability, social dynamics, and institutional barriers. Best practices include tailored interventions, financial flexibility, and healthcare integration. This paper uniquely synthesizes multiple disciplines, providing an integrated perspective and filling a significant literature gap. The study introduces models considering economic, psychological, and health-related variables, enhancing theoretical understanding. For practitioners, it offers adaptable best practices for regional and cultural contexts in Africa, including financial diversification, healthcare integration, and legal clarity. The societal impact extends to the elderly, their families, and communities, providing critical insights for policymakers to design effective, sustainable pension schemes to improve the quality of life for Africa’s aging population.

An Analysis of the Chinese Pension System Pointing to the Urgent Need for Reform

The pension system in China exhibits variations in the level of benefits provided to the elderly, influenced by their residential and employment status. This article applies the welfare-state typology commonly used in developed countries to analyze the Chinese pension system. The analysis reveals that the amount of pension received by individuals is determined by their place of residence and the employer type, resembling the characteristics of the conservative type in international welfare-state typology. For instance, in 2015, former public servants received approximately four times the pension income compared to those from the nonstate sector. These disparities result in rural elderly individuals who retired from the private sector facing meager income during their retirement phase. Consequently, immediate measures are needed to establish a basic safety net for retired individuals lacking a basic pension, while medium- to long-term reforms are required to instill fiscal sustainability akin to the liberal Western model. This research highlights the necessity of addressing the inequities within the Chinese pension system, calling for both short-term and long-term reforms to ensure adequate support for the retired population. By drawing upon insights from international welfare-state typologies, this study provides valuable recommendations for policymakers to establish a more inclusive and sustainable pension system in China.

Modeling mispricing risk of defined contribution pension plan with a mean–variance criteria

This manuscript addresses modeling mispricing risk of defined contribution pension plan (DCPP) with a mean–variance criterion to obtain the optimal investment strategy. Provides a way for the sustainability of pensions by investing in the financial market. The pension manager’s objective is to maximize the expected terminal wealth while simultaneously minimizing the associated risk. We employ the stochastic dynamic programming principle (SDPP) and the Lagrange dual theorem to derive the efficient frontier and strategy, then two special cases are examined. Last, we conduct a numerical analysis to show how different parameters influence the efficient frontier and strategy. This analysis sheds light on the economic implications of our findings.

How does the digital economy affect the sustainability of pensions? Evidence from China

ABSTRACT The relationship between an ageing population and pension sustainability is interrelated with the positive effect of the digital economy on both. However, there has been limited research conducted on the connection between the digital economy and pensions. In this study, we analyse the impact channels of the digital economy on pension sustainability using panel data at the city and provincial levels and an intermediary effect model. The analysis indicates that the digital economy can enhance the sustainability of pension funds through the mediating transmission mechanisms of economic growth, income, and employment effects. Furthermore, the development of a digital economy can effectively regulate the impact of ageing on the sustainability of pensions. We also discuss the relationship between digital development, population structure, and sustainable development of pension systems, along with policy advice.

Sustainable or not sustainable pension fund: This is the question. The case of environmental social governance policies in the Italian pension system

The Environmental Social Governance (ESG) framework is a fundamental issue in every field of economics. Integrating ESG factors into business models, strategies, and policies is the new frontier for financial intermediaries as European policymakers, regulators, and investors increasingly require this. Also, Pension Funds face the daunting task of generating sufficient returns to provide adequate and sustainable retirement incomes for their members in the context of an aging population. This current study aims to determine the relationship between Pension Funds’ performance and ESG attention in asset allocation strategies and how relevant the presence of gender diversity is in the board to promote this attention. The obtained results can contribute to formulating a deeper view of ESG practices, revealing significant aspects that influence sustainability action in the Pension Funds Italian market and providing recommendations for European policymakers and practitioners for the future.

Realitäten anerkennen, Rente zukunftsfähig gestalten

Abstract Current plans to permanently fix the level of benefits provided by the German Statutory Pension Scheme are at odds with the reality of demographic ageing and the requirements for sustainable pension policies. Instead, the causes of the ageing process ought to be addressed through poten-tially unpopular reforms. Linking the statutory retirement age to further life expectancy and building up supplementary funded pensions are core elements of a far-sighted reform that could stabilise the German system of old-age provision in the long run. In the short run, increasing con-tribution rates and reducing the benefit level are inevitable. This should be communicated very clearly.

The Economic Growth Factor in the Concept of Sustainable Reforms of National Pension Systems in the Eastern Europe Region

The international systems of indicators for the comparative assessment of the sustainability component do not always cover the Eastern European region, which can be considered an obstacle to the global understanding of the problems and possible solutions in the reform of national pension systems. At the same time, in the conditions when pension systems face the strong influence of several factors, and the operation and administration of national pension systems represent a challenge for most countries in the Eastern European region, it is important to determine the system of indicators, which would ensure a sustainable reform thereof. The article presents views on the systematization of the factors that influence the sustainable reforms of the national pension systems and the results of the study on the relationship between the factor of economic growth and the aging of the population, carried out for 10 countries in the Eastern European region and a chronological series 2010-2021. The data obtained on the correlation coefficient between economic growth and the rate of the elderly population confi rm recent research by other authors, carried out for 15 European countries during the same period, according to which the rate of the elderly population has a medium-level impact on economic growth for at least half of analyzed countries and for another third of countries there is no relationship between the economy and the 65+ population. The strength of the relationship between the economy and the elderly population in the period 2010-2021 was very weak in all countries in the Eastern European region. Moreover, in the Czech Republic and at the level of the region, this dependence could be considered as non-existent, the values of the correlation coefficients being close to 0. Only for Slovakia the correlation coefficient shows a slightly stronger but weak and opposite dependence, as for Belarus, Moldova and Russia. The author’s analysis does not validate the increasing burden of population aging in Eastern European economies, which means the lack of need to reorient public social spending towards higher age-related spending in the analyzed period. The study confirms the contradictory nature of the factor of raising the retirement age, thus, it could be removed from the list of beneficial factors of sustainable pension reform, and the cause-and-effect relationship between economic growth and the rate of the elderly population could be neglected. This study complements the data on the differences between Eastern European countries and Western and Northern European countries and would have an impact on policies to reform national pension systems, especially in the context of the political paradigm that supports the concept of a negative impact of aging on economic growth.

Raising the Pension Age

Raising the Pension Age

Sustainable Investing and Fiduciary Obligations in Pension Funds: The Need for Sustainable Regulation

Investment practices can support sustainability efforts or undermine them. As one of the world's largest capital pools, pension funds have a particularly important role to play in sustainable investing practices. In this article, I examine the U.S. requirement that fiduciaries of private‐sector pension plans must maximize financial returns without regard to the negative externalities those investments may create. Other countries, including South Africa, the original leader in sustainable pension investments, take a different approach. I make four major contributions in this article. First, I engage in a thorough literature review and identify the major strands of disagreement on whether U.S. fiduciaries may integrate ESG (environmental, social, and governance) factors into investment decision making. Second, I analyze whether the very different applications of fiduciary obligations (the implementing rules) on ESG investing in the United States and South Africa are attributable to the underlying legal systems. Comparison of common law and civil law shows that the underlying systems do not explain the differences in implementing rules. Third, I trace the source of the U.S. implementing rules to understand the motivations of the U.S. applications, and I do the same for South Africa. I determine that differences in the development of those rules provide the best explanation for their approaches. I conclude that legislative change is needed in the United States to provide stable guidance to U.S. pension plan fiduciaries. I offer a package of suggested reforms that could garner sufficient support for enactment.

Sustainability of pensions in Asian countries

Sustainability of pensions in Asian countries

Toward a Sustainable Pension System

This article presents a pension plan model aimed at maintaining the resilience of a nation’s social security infrastructure and ensuring retirees’ welfare. The aging population, labor market shifts, legislative changes, and unexpected economic crises (including the COVID-19 pandemic) have created distortions between annuity expenditures and national income. Many countries are experiencing rising life expectancy and in turn increasing public pressure to ensure a dignified existence for the growing elder population. This is challenging decision-makers and government-supervised pension funds to strengthen the financial soundness and solvency, stability, and distributive equity of public and supervised private annuity systems. We present a three-tier pension model that is unique because it is implemented in a small OECD country, and its implementation is flexible and changes according to the country’s demographic and financial changes. The presented model can be used as an example by other countries facing similar problems in their pension systems.

The old-age pension household replacement rate in Belgium

The objective of the paper is to examine the retirement behaviour of Belgian workers in one-earner households who are automatically granted a more generous old-age pension benefits replacement rate, called the household replacement rate. Following a recommendation of the Belgian Pension Reform Committee, this policy is to be suppressed for new pensioners, except for those receiving the minimum pension. We provide an ex-ante impact evaluation of such reform on both pension sustainability and adequacy measures. Specifically, we test whether the household replacement rate entails a work (dis)incentive mechanism promoting (harming) pension sustainability and furthermore, we analyse the role of the household replacement rate in old-age poverty and inequality measures. To do so, we use the survey dataset SHARE and a discrete time logistic duration model to study the link between retirement and financial retirement incentives created by the social security system. Further, we use a microsimulation model to estimate the magnitude of the assumed impact of the household replacement rate on retirement and we find that this policy generates higher retirement incentives through an income effect. At the same time, we simulate various social security wealth indicators under different household replacement rate scenarios and we find that the household replacement rate could potentially play an important role in decreasing the elderly poverty rate since households with asymmetrical working arrangements are often at the lowest part of the equivalized income distribution. Overall, despite the supposed positive poverty and distributional aspects of this policy, our simulation analysis supports the reform proposal of removing the household replacement rate.

PENSION - ONE OF THE BASIC ELEMENTS OF NATIONAL GOVERNMENT POLICY ON THE PUBLIC SOCIAL SECURITY SYSTEM

The article addresses an essential element of the public social insurance system. Pension is an important dimension in reducing poverty and multidimensional deprivation. It is an approach to thinking about processes, policies and interventions that respond to the economic and social risks and constraints faced by people at risk of livelihoods. At the same time, the actions of the state should allow the minimization of these negative influences by ensuring the operation of a fair and sustainable pension system, which guarantees a decent living for pension beneficiaries.

Justifying a financially and socially sustainable pension reform: a comparative study of Finland and France

PurposeIncreasing longevity and lower birth rates put pressure on the sustainability of pension systems. This compels countries to reform pension schemes. Different countries opt for different types of reforms. This article examines the scope of possibilities for a pension reform in two countries with distinct institutional and ideational setup: Finland and France.Design/methodology/approachThe authors utilise the framework of different modes of justification presented by Boltanski and Thévenot to reveal the reasoning used in pension reform discussions in both countries. The authors study expert reports to analyse how nationally constructed ideas and local institutions frame and shape the different logics and justifications.FindingsIn Finland, the approach to pensions is dominated by industrial and market justifications. The pension system is institutionally separated into two different blocks: one addressing poverty and the other income maintenance. The separation enables the prevalence of these logics and makes it easier to promote reforms that emphasize efficiency and individual responsibility instead of income distribution. The French report is concentrated around civic and domestic dominated justifications by stressing solidarity and the role of pension systems connecting individuals and generations together. Any reform needs to consider these issues.Originality/valueThe article uses a novel research design to study pension reform processes. The article distinguishes the roles that ideas and institutions have in shaping expert reasoning and reform options. The authors show how ideas and institutions form a mutually reinforcing loop which helps to explain path-dependency in pension systems.

The Aging Trend of Insureds and Stochastic Evaluation of Financial Sustainability of Basic Pension in China

The document, National Medium and Long Term Plan for Actively Responding to the Aging of Population points out that in order to actively respond to the aging population in China, it is necessary to steadily increase the endowment wealth reserves. To achieve this goal, it is urgent to stochastically assess the future financial situation of the basic pension insurance in China, grasp its various possible conditions, trends, and corresponding confidence intervals, so that the government can take targeted measures to gradually consolidate the wealth reserves for this basic insurance first, and then steadily increase the social wealth reserves for the elderly. Thus, this paper first analyzes the characteristics of the aging population of insureds participating in basic pension insurance, and then randomly simulates the long-term financial situation of the basic pension insurance. The study found that the aging of the insureds has the characteristics of “fierce coming and slow decline” and “long-term seriousness.” Among the six indicators of the financial situation of basic pension insurance, Indicator 1 (the current year's expenditures as a proportion of current year's contributions), Indicator 2 (current year's balance of contributions and expenditures), Indicator 3 (current year's payment gap as a proportion of current year's contributions), Indicator 4 (accumulated balance), Indicator 5 (fund ratio), and Indicator 6 (accumulated payment gap as a proportion of current year's contributions) are respectively in the range of [0.73%, 1.80%], [−12.05, −0.12] trillion yuan, [0.29%, 3.89%], [−133.39, −5.62] trillion yuan, [2032, 2043] years and [6.72%, 215.63%] with a probability of 95%. We analyzed the influence direction and degree of main parameters on the financial situation of the fund and analyzed the impact of parameter value paths on the final financial status of the fund to improve the ability to strengthen fund reserve. The backtracking found that if the value path of the average salary growth rate shows a trend of rising first and then falling, then the final financial situation at the end of the period will be “worse.” If it shows a trend of falling first and then rising, the final financial situation will be “better.”

The financial sustainability of public pensions in Cuba: The impact of ageing, structural reforms and the economic crisis

AbstractThis article analyses Cuba’s pension system from 2006–2021 with respect to its financial and actuarial sustainability and impact on the population. It includes discussion of the ageing population; the sharp cut in social expenditures since 2009; the deficit in pension financing and the impact of the 2008 parametric reform; the devaluation of pensions; structural reforms and the expansion of poverty and the curtailing of social assistance; the impact of the current economic crisis on pensions; and projections of the future financial sustainability of pensions.

Sustainability assessment of pension systems of new EU member states using data envelopment analysis with sensitivity and cross-efficiency analysis

This paper assesses the sustainability of pension systems of New Member States of the European Union that have undergone the transition to a market economy and the establishment of a multi-pillar pension model. Investigating pension sustainability from a slightly different perspective, we apply the Mercer CFA Institute Global Pension Index methodology, whose sustainability sub-index measures indicators that have a significant influence on the likelihood that the current pension system will be able to provide benefits into the future. However, this methodology predefines the weights for each indicator, which can be limiting for countries that have large oscillations between indicators. To obtain a sustainability analysis without predefined weights, we apply data envelopment analysis (DEA) to calculate efficiency scores using sustainability indicators as inputs. Furthermore, since DEA generally allows each country to load on their strong indicators as much as possible, allowing thus for self-appraisal, we perform the analysis of the perturbations in the data and examine how these changes affect the overall relative positions of the countries in the set. Also, we explore the cross-efficiency approach to define peer-appraisal as a more objective efficiency score. As a final step, a comparison of all EU Member States provides an overall perspective.

Impact Assessment for Sustainable Project Management And Pension Funds Projects Performance In Kenya

Sustainability is an evolving area of research and is grabbing the attention of corporations, research communities, and regulatory bodies worldwide which had enhanced its implementation. The prevailing trend towards economic growth in developing countries has resulted in a huge demand for delivering construction projects which in turn has overshadowed sustainability concerns. Consequently, project managers in developing countries are lagging in embracing the concept of sustainability in managing projects. Specific focus has been given to construction projects in the pension industry in Kenya. To address this challenge, the paper explored sustainable project management based on a comprehensive literature review through a desk review of numerous academic journal articles to evaluate pension funds projects performance. Three theories were used to provide a foundation for the sustainable project management practices: stakeholder theory, the Triple Bottom Line (3BL) concept which captures the essence of sustainability and theory of risk management. The study established that current project management practices of Kenyan Pension Funds do not always ensure project success that secure desired market returns on these investments. As the pension schemes are also expected to continue to invest in alternative assets given the broadening of the allowable investment categories and to take advantage of the public infrastructural projects under the big four agenda (RBA, 2021), it becomes paramount to identify and implement sustainable project management practices for performance of the pension funds projects. The outcome of this research showed that sustainability goals and environmental and social impact assessment contribute towards pension funds projects performance. The moderating effect of the regulatory framework was determined to be supportive towards sustainable pension funds projects performance.