Public Pension Schemes Research Articles

The effectiveness and choice of public pension scheme among Donglan county residents in China

BackgroundChina has made strides to achieve universal pension coverage through implementing the Public Pension Scheme for Urban and Rural Residents (PPSURR) program since 2014. This study explores the effectiveness of implementing the PPSURR in an impoverished county in China and investigates the determinants of residents’ choice on the contribution level of the PPSURR.MethodologyBinary logit regression models were conducted using datasets extracted from the Chinese General Social Survey in 2021 and datasets collected through surveying 321 residents in Donglan county, China.ResultThe PPSURR is demonstrated to be effective in reducing coverage gap between urban and rural residents in Donglan county, indicating the feasibility to utilize administrative support and public policies (such as financial subsidies) to address the urban-rural disparity in pension coverage at the county-level. Our study also found that county residents who are rich, had higher education attainment and better understanding towards policies were more likely to participate in the PPSURR; insured residents with higher income and live in urban area were more likely to select a higher contribution level.ConclusionIt’s urgent to gradually narrow benefits gap between urban and rural residents. Policy makers are suggested to offer more financial assistance for those from less wealthy backgrounds, promote public understanding towards related policies, and reduce the regional disparities.

Population aging, pensions, informality and labor market frictions in Lebanon. Reforms and policy choices

We evaluate the effects of population aging on the macroeconomic evolution of the Lebanese economy and the financial sustainability of its major pension schemes. We use an OLG model with labor market frictions as in de la Croix et al. (2013). Individuals are differentiated by their origin, age, gender, and education and choose the sector of activity, which implies that the size of the informal sector is endogenous. We assess the long-run implications of population aging and show that the public sector pension scheme is unsustainable. In contrast, the private sector scheme is insufficient to ensure decent living standards for the elderly. Finally, we evaluate the effects of two pension reforms. We first propose a mix of measures that guarantee the sustainability of the public sector scheme. Then, we evaluate the impact of the pension reform introduced in December 2023 and of an alternative reform aiming at increasing the size of the private sector scheme to improve the living standards for the elderly.

Internet Usage, Government Trust, and Participation of Informal Workers in Employee Public Pension Scheme

Incorporating more informal workers into the employee public pension scheme (EPPS) is a crucial component of building a high-quality employment security system in China. This study, based on data from the China Family Panel Studies (CFPS) for the years 2014, 2016, and 2018, empirically analyzes the impact of Internet usage on the participation of informal workers in the EPPS. The research finds that informal workers significantly increase the possibility of participation in the EPPS through the Internet usage. This positive effect remains significant even after a series of robustness tests. Heterogeneity analyses argue that informal workers with higher educational level are more likely to participate in employee public pension scheme through the Internet Usage than informal workers with lower educational level. Mechanism analysis suggests that informal workers significantly raise their government trust through the Internet usage, thereby promoting their participation in the EPPS. Based on the empirical results, the following policy recommendations are proposed: government should further utilize the Internet to streamline online enrollment procedures, reducing the time costs for informal workers to participate in the EPPS. Additionally, the government should actively engage with the public through the Internet to enhance its image and deepen the level of government trust of informal workers, thereby increasing their motivation to participate in the EPPS.

Sustainability of the Public Servant’s Pension Scheme in Sri Lanka

Despite the global trend towards defined-contribution pension schemes, many public service pensions continue to follow defined-benefit structures, imposing a significant fiscal burden. This paper analyses the main public sector pension scheme in Sri Lanka in a context where the population is ageing rapidly and the government faces strong fiscal constraints. The study aims to forecast the costs of the Public Servants’ pension scheme and quantitatively evaluate policy options for improving fiscal sustainability. The study extends the model of Rannan-Eliya et al. (1998) using detailed data on the number and age structure of pensioners as well as information on public sector wages, inflation, and GDP growth. The model’s output is validated using observed pension costs from 2016-2022, and projections and policy simulations are carried out for 2023-2027. The study finds that expenditure on the scheme is estimated to increase by 6% annually and 10% over the next five years in real terms. Reducing the generosity of pension payments, raising the retirement age, suspending gratuity payments temporarily, and reducing the replacement rate for new retirees result in significant reductions to the annual pension bill, although the latter two options are unlikely to be politically feasible.

Intergenerational actuarial fairness when longevity increases: Amending the retirement age

Continuous longevity improvements and population ageing have led countries to modify national public pension schemes by increasing standard and early retirement ages in a discretionary, scheduled, or automatic way, and making it harder for people to retire prematurely. To this end, countries have adopted alternative retirement age strategies, but our analyses show that the measures taken are often poorly designed and consequently misaligned with the pension scheme's ultimate goals. This paper discusses how to implement automatic indexation of the retirement age to life expectancy developments while respecting the principles of intergenerational actuarial fairness and neutrality among generations of the respective policy scheme design. With stable demographic conditions, we show in policy designs in which extended working lives translate into additional pension entitlements, the pension age must be automatically updated to keep the period in retirement constant. Alternatively, policy designs that pursue a fixed replacement rate are consistent with retirement age policies targeting a constant balance between active years in the workforce and years in retirement. Under conditions of population ageing, the statutory pension age will have to increase at a faster rate to meet the intergenerational equity criteria. The empirical strategy employed a Bayesian Model Ensemble approach to stochastic mortality modelling to address model risk and generate forecasts of intergenerationally and actuarially fair pension ages for 23 countries from 2000 to 2050. The findings show that the pension age increases needed to accommodate the effect of longevity developments on pay-as-you-go equilibrium and to reinstate equity between generations are sizeable and well beyond those employed and/or legislated in most countries. A new wave of pension reforms may be at the doorsteps.

Life After Retirement: Exploring the Survival Strategies of SSNIT Pensioners in the Greater Accra Region of Ghana.

Ghana's elderly population represents about 6.7% of the national populace. They comprise persons aged sixty years and above, including retirees. The main source of income for some of these individuals, particularly those who worked in the formal sector is the monthly pension they receive as compensation for contributing to Ghana's public pension scheme known as the Social Security and National Insurance Trust (SSNIT) while they were working. However, some beneficiaries of the scheme have raised concerns about the inadequacy of the pension income. Old age is accompanied by other social, economic, and health issues that tend to be detrimental to one's well-being. In this study, the survival strategies adopted by SSNIT pensioners to assuage the challenges they encounter, mainly due to inadequate pensions were explored. The mixed-methods research design was employed to gather data from 437 respondents. Whereas the quantitative findings were analyzed via the Stata software, the framework approach was adopted to analyze the qualitative data. The majority (78.7%) of the pensioners indicated that their pensions were insufficient to meet their needs. In their quest to address the challenges confronting them, the pensioners either adopted survival strategies they considered suitable or resorted to other non-prioritized coping mechanisms perceived to be relevant only in times of urgent necessity. Based on the findings of the study, some recommendations for policy and practice were presented.

Fair crack of the whip? The distribution of augmented wealth in Australia from 2002 to 2018

The omission of pension wealth potentially distorts the international comparison of wealth distributions. Private pension wealth is often included in households’ wealth portfolios, while public pension claims are not. Augmented wealth, the sum of net worth and pension wealth, resolves this limitation by including the present value of social security pension wealth. This article provides a detailed analysis of augmented wealth in Australia between 2002 and 2018, capturing the establishment of the compulsory private pension scheme, Superannuation, which was introduced in 1992. Augmented wealth is slightly less equally distributed in Australia than in Germany or Switzerland but more equal than in the United States. The article also explores the relationship between Superannuation dissaving rates and the means-tested public pension scheme, Age Pension, and its distributional implications.

Collection Efficiency of Public Pension Funds: Based on Dynamic Panel Threshold Model

This study examines the impact of the regional old-age dependency ratio on the collection efficiency of public pension funds using statistical data on contributions of public pension schemes for urban employees in 31 Chinese provinces and municipalities between 2010 and 2015. An inverted U-curve relationship between the regional old-age dependency ratio and the collection rate of public pension funds was observed with a single threshold value of .5439, thus, suggesting the need for a change in the soft constraints on collection responsibility and an optimization of the institutional structure underlying public pension schemes.

Pension financialization and collective risk sharing in Canada and Finland

AbstractThis article contributes to the debate concerning pension financialization and how countries are adapting their pension systems to respond to demographic ageing. We do so by examining the statutory pension systems of Canada and Finland, which diverge interestingly from current international trends. The Canadian and Finnish public pension schemes reflect two tendencies often associated with pension financialization: an increasing reliance on financial markets and an investment policy with a diversified asset allocation. However, unlike in many other countries, this has not resulted in heightened individual risks in old‐age income security caused by a shift from defined benefit to defined contribution pensions – an otherwise common trend internationally.

Improving economic security for older persons by public pension schemes: evidence from National Transfer Accounts for India.

This paper develops a framework for analysis of distribution related policy issues (i.e. inequality, poverty and inequity) for ensuring economic security for India's older persons by the public old-age pension systems with special reference to Indira Gandhi National Old Age Pension Scheme (IGNOAPS). The analysis is focused on (a) measurement of age-specific and intra-generational inequity by Lifecycle Deficit in the framework of National Transfer Accounts (NTA), (b) relationship between this inequity and poverty and inequalities in distribution of income and consumption and (c) role of current public funded IGNOAPS to improving economic security or reducing inequity for the elderly generation. The entire analysis is based on the benchmark year 2004-05 and a comparative analysis between 2004-05 and 2011-12. Main results show (a) remarkable age and intra-generational patterns for the older persons in labour income, consumption, income and consumption inequalities, consumption poverty and inequality-adjusted inequity and (b) efficacy of poverty-linked universal IGNOAPS to improve economic security or reducing the inequity for the older persons at a national cost of less than 0.20% of total revenueor consumption expenditure of Government of India. These results offer empirical evidence for design and implementation of redistributive policies for the older persons by integrating the objectives of reduction in economic inequalities, poverty and inequity. Such policies have wider implications for attainment of select UN-SDG goals, especially goals related to age-specific reduction in poverty and inequalities. The approach, results and implications of this paper are of general relevance for other developing countries in Asia and Africa if their economic policies aim at improving economic security of the older person in the framework of NTA methodology.

Measuring Financial Sustainability and Social Adequacy of the Italian NDC Pension System under the COVID-19 Pandemic

The COVID-19 pandemic is presently influencing the financial sustainability and the social adequacy of public pension schemes. In this paper, we measure the effects of COVID-19 on the Italian public pension system by introducing a deterministic shock due to the pandemic in the evolution of the variables mainly involved in the system’s evaluation. These variables, namely the unemployment rate, wage growth rate, inflation rate, and mortality rates, are modeled in a stochastic framework. Our results show that COVID-19 worsens the financial sustainability of the pension system in the short–medium term, while it does not appreciably affect social adequacy in the medium term. The Italian pension system already showed a social adequacy problem before 2020, which the pandemic does not further deteriorate essentially.

The pan-European Personal Pension Product: key characteristics and main challenges

Against the background of increasing challenges within the European Union related to ageing societies, a prevailing low interest environment, increasingly mobile life and work across the EU and the general distribution of wealth, several stakeholders within the EU have acknowledged the need to support the adequacy of national public pension schemes. This resulted in the conception of a Pan-European Personal Pension Product (PEPP), voluntary and portable across the European Economic Area (EEA), aiming at combining profitability, transparency as well as the security and quality of the related investments. Embedded into the greater scheme of the aspired European Capital Markets Union, PEPP is intended as simple and affordable savings option for everyone with the goal of closing the pension gap. This paper revisits the process towards the current, finalized state of PEPP, exploring its product features, regulatory requirements and key challenges with regard to the possible emergence of products since 2022.

Growth and Welfare Implications of Mortality Differentials in Unfunded Social Security Systems

Several recent studies have examined the steady-state welfare implications of mortality differentials within unfunded Social Security systems, concluding that these differentials undermine the progressivity of the system and make society worse-off relative to alternative public pension schemes. This study is the first to systematically investigate the long-run implications of mortality inequality within the U.S. Social Security system. Utilizing an OLG endogenous growth model of the U.S. economy, I compare the current pay-as-you-go (PAYG) system to versions of the model without either mortality differentials or income inequality. I find that the assumption of mortality homogeneity biases the equilibrium growth rate and welfare analysis. The PAYG system is also compared to a fully funded system based on capital subsidies. The model predicts that PAYG suppresses growth and that, for a given range of subsidy rates, the fully funded system Pareto dominates PAYG in both the medium-run and the long-run.

ТРАНСФОРМАЦИИ ПЕНСИОННЫХ СИСТЕМ В ЕВРОПЕЙСКИХ И ЛАТИНОАМЕРИКАНСКИХ СТРАНАХ

The article observes the evolution of pension policy in European and Latin American countries over the last 25-30 years. The main reason for the profound changes occurred in this area lies in the marked acceleration in population aging, taking place both in the Old and the New World, including Latin America, considered a young region for a long time. The cross-country comparative analysis shows that the main tasks of reforms consist in ensuring the long-term financial sustainability of pension systems, preventing further growth of spending on public pension schemes by raising the retirement age and prolonging the labor activity of senior people. Gradual expansion of population covered by accumulative (funded) pension plans, in addition to distribution component, is another tool. Meanwhile the actual situation demonstrates that the initiatives of some European governments, following the recommendations of international financial institutions, are not always adequately perceived by the society (Spanish and French cases are representative examples). Moreover, it should be pointed out that European experience is actively examined in Latin America during the ongoing reforms to create multi-level national retirement systems, and greater attraction of private entrepreneurial capital for public financing of social security models. A review of the publications of Russian scientists shows that the latest world experience is not ignored in our country, where the task of more reliable social protection of pensioners is on the agenda.

Pensions and Timing of Retirement: The Case of the Public Service Pension Scheme in Uganda

Unsustainable defined-benefit public pension scheme, rising life expectancy, and high level of unemployment endanger the socioeconomic and political stability of Uganda’s economy. This research approaches the problem from labor supply point of view by: (i) analyzing the effect of the public service pension scheme on timing of retirement; (ii) investigating the required early retirement incentives that would increase employment in the public service; and (iii) determining the predictors of postretirement employment in the public service in Uganda. Using a cross sectional secondary dataset of the retired public servants from the Uganda’s Pension Department of the Ministry of Public Service (2016), this study finds the model fitting the observed aggregate retirement behavior very well. Results reveal: first, that the retirement conditions in the public service’s pension scheme in terms of the: mandatory retirement age (MRA), early retirement age (ERA), minimum tenure (MT), and pension benefits; significantly influence timing of retirement. This implies that the public service pension scheme in Uganda can be used as a fiscal tool for addressing labor supply challenges in the country.Second, about 20 percent increment in the monthly pension benefits, and 10-year increment in ERA jointly with a 5-year increment in MRA raises the likelihood of new jobs pace by up to 12.2 percent and 30 percent respectively, through early retirement.This implies that these early retirement incentives can be used to achieve intra-generational equity where some previously employed public servants retire early and survive on pension benefits as few unemployed people join public service to earn a wage.Third, among other predictors, postretirement employment in the public service is explained by:entry age, tenure, and salary. These factors can be used by the government to achieve a sustainable pension scheme through oldage employment (increased labor supply) which reduces the years taken to claim pension benefits.

The Janus face of austerity politics

How is social reproduction possible in a context of precarious employment and austerity policies that have defunded welfare? The paradox of autonomy and dependence is present in intergenerational relations of support and conflict at various scales. It emerges, on the one hand, in the neoliberal injunction to be individually responsible for one’s own present and future wellbeing, an aspiration that is impossible to fulfill. On the other hand, it is expressed in the increasing recourse by younger active cohorts to the care work and assets of their older kin—in particular retirement pensions and a home. Finally, policy calls to transform the pension system oppose younger and older generations in the accountings of social security financial sustainability and question the fairness of existing public pension schemes.

Researching the Dynamics of National Social Policy in a Globalized Society. A Proposal for a De-Nationalized Analytical Framework

Abstract Epistemological hierarchies in the social sciences stipulate that sedentarism is naturalised as a normality, and that mobility is viewed as a deviation. This article sets out to propose an analytical framework that takes the analysis beyond this kind of nationalized knowledge production, and to empirically show the gains of de-nationalized frameworks for analysis of social protection and dynamics of in-/equality in the globalised society. I will do this relying on the empirical example of the public old-age pension scheme in Sweden.

Optimal annuitisation in a deterministic financial environment

The global reforms to public pension schemes over the last thirty years have progressively reduced individuals’ post-retirement social security income. In order to compensate for this, individuals join pension funds and individual plans to increase their wealth at retirement. These types of fully funded plans generally give individuals the opportunity to withdraw the capital accumulated into their scheme or to convert it into an annuity. In this paper, we analyse individuals’ post-retirement choices to allocate the wealth at retirement between consumption, risk-free investments and a life annuity. We develop a discrete time optimisation model, in a deterministic framework, with a constant relative risk aversion (CRRA) utility function. We study the effect of a bequest motive and the annuity rate used by the insurer on the optimal choice. Several numerical applications are presented to illustrate the optimal annuitisation decision results and the optimal consumption paths.

Declining Natural Interest Rate in the US: The Pension System Matters

The natural interest rate is the level of the real interest rate compatible with potential output and stable prices. We develop a life-cycle model and calibrate it to the US economy to quantify the role of the public pension scheme for the past and future evolution of the natural interest rate. Between 1970 and 2015, the pension reforms have overall mitigated the secular decline in the natural interest rate, raising it by around one percentage point and thus counteracting the downward pressure from adverse demographic and productivity patterns. As regards the future, we simulate the effects of the demographic trends, expected between 2015 and 2060, combined with alternative pension reforms and productivity growth scenarios. We rank the different policy options according to a welfare criterion and study the implications for the natural interest rate. A reduction in the replacement rate outperforms, in terms of welfare, an increase in the contribution rate in the “normal growth” scenario and vice versa in the “stagnant growth” case.

Need to Increase the Public Servants’ Retirement Age to 65 in Uganda: Policy Report.

This paper investigated the need to raise Mandatory Retirement Age (MRA) and to what level, in Uganda; as a policy towards addressing the challenges that emanate from rising life expectancy and unemployment. Guided by two theories: time allocation theory and positive theory of early retirement; while using the Early Retirement Incentives (ERIs) of the public service pension scheme as a probing tool, with probit simulations as estimation techniques on public servants’ retirement dataset (2017), results strongly support increment in the MRA from 60 to 65. For the named socioeconomic challenges, the policy is more effective if jointly implemented with a rise in Early retirement age from 45 to 55.