Providing Retirement Benefits Research Articles

Does team size and tenure matter for European pension funds?

ABSTRACT Pension funds are investment vehicles quite different from mutual funds, because they are specifically designed to provide retirement benefits. We examine the effect of management team size and experience on the ability to capture flows, generate performance (returns and alphas), and risk (value at risk) in a sample of European equity pension funds. To achieve this objective, we resort to cointegration econometric methodology. After analysing the stationarity of the series, we estimate four different proposed relationships to lower the short-run and long-run effects of team size and manager experience on different metrics of pension funds. Our findings reveal a negative short-term effect of team size on pension fund flows and returns, but not on risk-adjusted performance (alpha). Additionally, team size shows a relationship with value at risk (VaR), leading to decreased expected losses as team size increases. Conversely, manager experience positively influences flows in the long run but has negative effects on alpha, not impacting returns.

Effect of Corporate Governance, Investment Strategy and Macroeconomic Factors on Financial Performance of Pension Schemes in Kenya

Pension schemes form a significant part of the global investment portfolio. In Kenya, they hold over 13% of the country’s GDP (OECD, 2018). Their importance is underscored by the fact that they contribute significantly to growth and development of world economies (Kakwani, Davis, 2005; Heijdra, Ligthart & Jency, 2006). Their financial performance is critical to the provision of retirement benefits. Khan, Nouman & Imran (2015) observed that the financial performance indicates measures to which economic goals of an organisation has been accomplished over particular time period. Pension schemes however, face numerous challenges that can render the generation of retirement benefits inadequate. A number of studies have been undertaken to evaluate the impact of factors that influence performance of pension funds resulting in mixed and sometimes inconclusive findings. This study sought to assess the effect of corporate governance, investment strategy, interest rate, inflation rate, exchange rate and GDP growth rate on performance of pension funds in Kenya. The study was done using annual data on pension funds and economic indicators spanning the period 1997 to 2018. In addition, it used questionnaires to gather data on corporate governance and investment strategy indices. Quantitative and correlational research design using Linear regression model was used to assess the effect of corporate governance, investment strategy, interest rate, inflation rates, GDP growth rates and exchange rate on pension performance. The study findings show that these factors had significant impact on pension funding. They however, varied on their individual contribution to the prediction of funding level of each pension fund. The study concludes that pension fund management and policy makers should take into consideration the effects of macroeconomic factors, corporate governance and investment strategy in decision making on investment plans to ensure generation of adequate funds to fulfill their key objective of providing retirement benefits to the members.

Good job, good pension? The influence of the workplace on saving for retirement

AbstractMost private-sector employees in the United Kingdom (UK) are automatically enrolled into individualised defined contribution (DC) pension accounts. In a DC environment, income adequacy in retirement is highly dependent on the decisions that individuals make earlier in their lives. The ease with which they move into employment, and the pension support that they then receive from their employer, can be critical in determining outcomes. This paper discusses how employees respond to workplace pension schemes and the circumstances under which they assess the suitability of their contributions. The findings are based on an embedded case study comprising qualitative interviews with 25 employees of a large UK utility company. Participants were selected on the basis of socio-economic similarity. The research concluded that fixed-term employment negatively impacted on saving for retirement, both with respect to scheme membership and to the level of saving. Furthermore, it was found that the employment context had an influence upon retirement savings behaviour. The proactive approach of the employer in providing retirement benefits, and the trust that employees had in their employer, positively influenced membership and contribution levels. In addition to employer endorsement effects, both the encouragement of older work colleagues and workplace norms had a role to play in influencing how successfully individuals prepared for retirement.

Understanding Decisions in State Pension Systems: A System Framework

State governments establish pension systems to provide retirement benefits to public employees. State governments as sponsors, state legislatures as policy makers, and public-sector unions as representatives of public employees may exert considerable influence over the decisions made in pension systems. This study applies a system framework to examine these influences. It focuses on four decisions in pension systems: benefits, employer contributions, employee contributions, and the asset smoothing period. The findings show that changes in the short- and long-term financial conditions of a state government have different influences on pension decisions, and that legislatures and public employee unions play important roles that affect these decisions.

PREDICTION OF MORTALITY RATES USING AUGMENTED DATA

Prediction of future mortality rate is of significant priority in the insurance industry today as insurers face challenging tasks in providing retirement benefits to a population with increasing life expectancy. A time series model based on multivariate power-normal distribution has been used in the literature on the United States (US) mortality data in the years 1933 to 2000 to predict the future mortality rates in the years 2001 to 2010. To improve the predictive ability, the US mortality data is augmented to include more variables such as death rates by gender and death rates of other countries with similar demographics. Apart from having good ability to cover the observed future mortality rate, the prediction intervals based on the augmented data performed better because they also tend to have shorter interval lengths.

Retirement Reform in South Africa: The Influence of International Social Security Standards and Human Rights Instruments

The unique retirement funding system in South Africa, encompassing social assistance for older persons, occupational retirement funds providing retirement benefits to members and private retirement savings, is undergoing radical reform. Due attention has to be given to international human rights instruments and social security standards in the design of any new legislation dealing with retirement. This article commences with a brief overview of why reform of the South African retirement funding system is required and a case is made for intergenerational solidarity as a core principle on which the reforms and future legislation on older persons should be based. It then examines selected international standards related to retirement, and highlights areas where statutory reform is required to bring South African law in line with these standards. The main focus of the paper is on the seemingly divergent views of international organizations on the extent to which intergenerational solidarity should form the basis of retirement reform. It is suggested that, although none of the International Labour Organization's (ILO) core social security standards have been ratified by South Africa, the ILO still has an important role to play in providing guidance in respect of retirement funding reform, based on its clear preference for solidarity-based national social security schemes.

Adopting Micro Insurance Models in Providing Pension Benefits to Nigerian Rural Dwellers

Employees are faced with unpredictable retirement life, and therefore dream of guaranteed income inflow during retirement. Acquisition of shares and buildings for commercial purposes seems to be the easy antidote to this challenge, until the introduction of the Contributory Pension Scheme in 2004 by the Nigerian government. The scheme legally guarantees 50% lump payment upon retirement and the spreading of the payment of the remaining 50% of the total retirement benefit on regular basis throughout the life span of the retiree. The latter 50% could be used to buy savings account or annuity contract. However, most retirees are faced with the problem of irregularly paid incomes, which usually are very low. This paper x-rays the expected impact of micro insurance scheme on providing retirement benefits to the rural dwellers. It was found that Micro Insurance Scheme will help to provide retirement benefits through collection and invest of savings made payable to the rural dwellers on retirement. Therefore, it was concluded that micro insurance scheme is the preferred way of providing pension benefits to the rural dwellers upon retirement. Hence, we recommend that Nigerian governments should encourage micro insurance pension for rural dwellers, mostly the artisans, through effective enlightenment measures.

The Current Situation of Retirement Income Provisions in Japan: Social Security Pension Schemes and Corporate Pension Plans

Japan has been faced with rapid population ageing for decades. This has continuously reduced the level of social security pension benefits. Based on this it is often said that corporate pension plans should play a wider role forward in providing retirement benefits. However, we also have to know that there is a limit to what corporate pension plans can do in place of the social security pension schemes. In this paper we extract lessons from the history of social security pension schemes in our country and try to define the roles of corporate pension plans and social security pension schemes. In conclusion we should keep adequacy of social security pension benefits even if the contribution rate becomes a bit higher. Corporate pension plans just enrich people’s life in retirement. We have to remember that corporate pension plans were not certain means for reducing the poverty in old age and that for this reason social security pension schemes by social insurance were invented.

The Limitations of Retirement Plan Law

It is widely believed that employers determine whether or not their employees receive retirement benefits and the type and amount of any benefits that are received. This belief is mistaken. While sponsorship of a retirement plan is a voluntary choice on the part of the sponsoring employer and the sponsoring employer directly controls the type of plan and the level of benefits provided, the employer's choices on these matters are controlled by its employees' preferences for different forms of compensation. In order to attract and retain the best workers, an employer must spend the funds available for employee compensation so as to provide its employees with those forms of compensation that the employees value most highly. An employer includes retirement benefits in its employees' compensation packages when the employees prefer those benefits to other forms of compensation. In addition, in the long run, employees bear the costs of their retirement benefits. These facts mean that employees receive the retirement benefits that they want and are willing to pay for. This conclusion undercuts the foundation of much of the law that regulates employees' retirement benefits, which includes the Employee Retirement Income Security Act (ERISA) and portions of the Internal Revenue Code. In general, these laws are intended to enhance the quality of retirement benefits and to increase the levels of retirement benefits received by employees, particularly by nonhighly compensated employees. These laws attempt to accomplish these purposes by requiring that retirement benefits be provided on certain specified terms and by reducing the income tax liabilities of employees who receive compensation in the form of retirement benefits. Mandatory enhancements in the quality of retirement benefits increase the costs of the benefits; since employees must pay for this enhanced quality, fewer employees, especially lower-paid employees, pay for and receive retirement benefits. Therefore, qualitative regulation of retirement benefits tends to restrict the benefits to higher-paid employees. As presently structured, the tax incentives do little to provide retirement benefits to nonhighly-compensated employees. Revisions to the present structure, such as requirements for broader employee participation, faster benefit accrual, more rapid vesting, and larger benefit allocations for nonhighlies, are frequently proposed; these proposals are intended to increase the benefits received by nonhighlies. However, when such proposals are considered in light of the fact that ultimately employees receive the retirement benefits that they are willing to pay for, it becomes clear that they will generally have the perverse effect of decreasing the retirement benefits of nonhighlies. In a voluntary retirement plan system, legal rules cannot compel employees to buy more and better retirement benefits than they want. The foundation of ERISA and the retirement plan provisions of the Code is fundamentally unsound.

New developments concerning the Orange County employee retirement law

The County Employees Retirement Law of 1937 paved the way for employer‐sponsored retirement programmes to be created. One such programme is the Orange County Employees Retirement System. It was implemented in 1945 to provide retirement benefits for public service employees. Since that time, many new developments have resulted in changing the system to better service the members. Those new developments include SB 558, the cancer presumptive bill, AB 1817 affecting disability retirement, AB2841 increasing employer contributions, and AB1937 increasing retirement allowances. Using Orange County as an example, these developments are analysed according to their affects upon employees. The significance of these developments for employers and employees of all companies is to encourage the appropriate action necessary to implement change in a positive way for all members of a retirement scheme.

Alternatives for Providing Family Retirement Benefits in Social Security and Employer Sponsored Pension Plans

This paper looks at different ways to think about the economic relationships within the family and relate them to various ways of providing for retirement security, within a Social Security and employer framework. We look at what Social Security offers in different family situations in the United States and provide examples from overseas. This paper presents a framework for thinking about the economic security of spouses and translates that into alternatives for family benefits within Social Security and private retirement systems. It focuses on issues related to providing retirement benefits for spouses, widows, and divorced spouses and discusses some of the considerations in Evaluating equal compensation versus a greater benefit to participants who have dependents. We look at the issues from the perspective of the government, employer, and individual. The employer's role is related to the government's and the individual's roles in providing for retirement security.

Alternative Retirement Income Arrangements and Lifetime Income Inequality: Lessons From Australia

This paper examines the implications for lifetime income equality of alternative retirement income arrangements, using the Australian scheme as a benchmark. In Australia, the pay-as-you go financed age pension is means-tested and thereby provides a contrast with those countries where part or all of a basic pension is paid to all aged persons. Many governments are considering an increase in the level of means-testing. The results show that the introduction of a universal pension coupled with significant changes and simplifications to the structure of taxation and superannuation have little effect on the redistributive impact of the tax structure in a life cycle framework. The presence of means-testing appears to have no significant effect on life-time inequality. The results suggest that it is possible to eliminate complexities from the system providing retirement benefits without having any deleterious effect on equity.

Trust and Ethics in Employee-Owned Companies

Employee-owned companies have ethical and trust issues that differ from other companies. Employee ownership provides a structure that aligns a corporation's private self interest with public goals such as distributing wealth and providing retirement benefits. This alignment promotes ethical conduct. All corporations strive to promote long-term trust between the enterprise and its key constituencies such as shareholders, employees, customers, suppliers and directors. Major corporate transactions highlight the importance of trust issues and sometimes trust can be more important than economics. With em ployee-owned companies, the enterprise's trust relationship with employees and shareholders is crucial. However, if the relationship is properly developed and maintained, the enterprise can avoid the conflicts between the short-term perspectives of some shareholders and the longer-term perspectives of employees. Employee ownership can enhance both ethical behavior and trust relationships. In this paper, we will consider ethical and trust issues in employ ee-owned companies using a practical business approach to these issues. First, we will discuss the conceptual framework for the ethical

Nurses' pensions: a need for change.

Although most hospitals provide retirement benefits to nurses, a number of factors conspire to prevent many nurses from enjoying the benefits. It is quite possible for nurses to work continually in their profession and yet be ineligible for a pension on retirement. The unique circumstances of nurses career working patterns are outlined as are characteristics of hospitals' pension plans. Action is recommended at three levels: individual, employee and professional.

Implications of population change on social insurance systems providing old-age benefits

General agreement, although not completely universal, exists in North America that cost analysis of programs providing old-age retirement benefits should be conducted over the long range, and not merely over the next few years. The actuarial cost estimates for what is now the U.S. Old-Age, Survivors, and Disability Insurance program have always been made over a long period of future years. Initially, for the 1935 Act, this period was 44 years (up through 1980), but most subsequent valuations of the program have used a 75-year period. The justification for this length of time is that it covers essentially the entire lifetime of every person in covered employment on the valuation date. It must be recognized that outside of North America — but with the exception of the United Kingdom — long-range social insurance programs providing retirement benefits are not generally considered over long future periods. The argument made in support of this short-sighted approach is that it is impossible to predict with any precision such long-range future operations. Countering this is the point that an estimate prepared by well-qualified persons is far better for policy planning and analysis than nothing at all.

TIAA/CREF: Who Gets What? An Analysis of Wealth Transfers in a Variable Annuity

The Teachers Insurance and Annuity Association and College Retirement Equities Fund (TIAA/CREF) administer, through CREF, the largest variable annuity pension plan in the United States. The variable annuity is an important financial instrument, one increasingly being used to provide retirement benefits. TIAA/CREF is examined here both to provide information for its participants and to note choices that those considering introducing new variable annuity plans must make. CREF's investment experience, which has been neither exceptionally good nor bad, is not examined in detail. Rather, this study focuses on the rules for determining benefits paid during retirement. TIAA/CREF rules result in certain interand intra-beneficiary transfers of wealth. Although the amounts transferred are small,' they are systematic and rectifiable with changes in the rules. TIAA/CREF has changed procedures in response to well-reasoned arguments.2 We hope this work has such an effect.

Helping Employees Save for Retirement: What is the Responsibility of Christian Higher-Education Institutions?

A great deal of evidence suggests that most people have not made adequate provision for retirement. This paper examines the responsibility of Christian higher-education institutions that have elected to provide retirement benefits as part of their employees’ overall compensation. It also analyzes the current state of retirement provision at over one hundred Christian higher-education institutions. Institutions who offer retirement benefits should design robust policies that encourage participation, a strategy that could be advantageous to both employees and institutions. While significant plan enhancements have been made, Christian higher-education institutions appear reluctant to implement automatic enrollment and escalation features in their retirement plans.