Sustainability Of Pension System Research Articles

COMPARATIVE ANALYSIS OF PENSION SCHEME IN NIGERIA AND UNITED KINGDOM: BRIDGING THE GAP

Objective: This study conducts a comparative analysis of pension schemes in Nigeria and the United Kingdom, examining key dimensions to provide a comprehensive understanding of each system. Theoretical Framework: The research objectives focus on comparing the structural frameworks, types of pensions available (state, occupational, and personal), and adequacy of pension benefits. Method: Utilizing a non-doctrinal methodology, the study assesses investment strategies, administrative efficiency, and risk management practices to identify strengths and weaknesses. Research and Discussion: The findings reveal that the pension scheme in the United Kingdom is more robust than Nigeria's. Notably, the UK's pension scheme exhibits a gender bias, with males receiving higher income accruals than females. In contrast, Nigeria's contributory pension scheme neglects the informal sector, unlike the UK's more inclusive approach. The study's implications suggest that collaboration between Nigeria and the UK can bridge the gaps in their pension schemes. Research Implication: This research contributes to the existing body of knowledge by highlighting areas for improvement in Nigeria's pension scheme. The results provide valuable insights for policymakers and stakeholders seeking to enhance the effectiveness and sustainability of pension systems. Originality and Value: The comparative analysis offers a unique perspective on the strengths and weaknesses of each system, informing potential reforms. Ultimately, this study aims to promote dialogue and cooperation between Nigeria and the UK to develop more equitable and efficient pension schemes. By addressing these gaps, both countries can better ensure the financial security and well-being of their citizens in retirement.

Financial Sustainability Above All Else? Drivers and Types of Pension Reform Recommendations in EU Socio‐economic Governance

AbstractThe average age of the population and the ratio of workers to pensioners in the European Union (EU) are rising, putting increasing pressure on the long‐term sustainability of pension systems. To counteract this development, a large number of pension reform recommendations (PRRs) have been issued within EU socio‐economic governance. In this article, we analyse the extent to which PRRs are consistent with the three main objectives of the open method of coordination (OMC), which emphasise (i) financial sustainability, (ii) benefit adequacy and (iii) modernisation with respect to gender equality. Using an original dataset, we code 438 PRRs from 2011 to 2023 and analyse the extent to which these are consistent with the three main objectives of the OMC. Our results show that PRRs are primarily focused on financial sustainability, to the detriment of adequacy and modernisation, and that they are driven solely by sustainability concerns.

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.

Policy interplay among social health insurance system, pension system, delayed retirement initiative and implications for the self-rated health status of older workers.

Delayed retirement initiative proposed in China attaches greater importance to the sustainability of pension systems and the labour shortage, but less to the health status of older people. The existing social health insurance and pension system are not well established to match this initiative. This study investigates the policy mix of delayed retirement, employment-based social health insurance, social pension participation for health status of older people. Results of the data from the China Health and Retirement Longitudinal Study (CHARLS-2018) show that late retirement could benefit health status among older adults. Moreover, such effect of late retirement appears more salient for those uninsured by employment-based social health insurance and those still in the pension contribution phase upon reaching the statutory retirement age. Hence, in countries with inadequate health insurance and pension systems, such as China, delayed retirement may serve as an important alternative to social security for the health of older people.

Об’єднання єдиного соціального внеску і податку на доходи фізичних осіб у контексті євроінтеграційних прагнень України

Introduction. The high tax burden on labor is a problem not only for Ukraine, but also for many European countries, negatively affecting the labor market, in particular, it is considered one of the reasons for relatively high unemployment and informal employment. In Ukraine, it is proposed to solve this problem by consolidation the unified social contribution(hereinafter-USC) and personal income tax( hereinafter-PIT)(in fact, by abolishing the unified social contribution). Problem Statement. Despite the fact that the implementation of this proposal is associated with serious fiscal and social risks, it has not been the subject of scientific debate, although it was first published in Ukrainian periodicals in 2018-2020. Purpose. To assess the abolition of the unified social contribution in the context of compliance of such a transformation with European guarantees of adequate social protection and the European social model in general. Methods. The methods used are comparative and statistical analysis, abstract logic, analogies and theoretical generalization. Results. It has been established that, unlike the proposal to consolidate USC and PIT in Ukraine, the implementation of which will lead to a decrease in the living standards of people who have already retired and will receive a minimum income from the state budget, which will be able to protect them only from absolute poverty, and reliance on future pensioners-participants of private pension funds of all risks related to their provision after termination of employment, principle 15 of the European Pillar of Social Rights emphasizes the right of older persons to adequate pensions and a dignified old age. The importance of achieving this goal is evidenced by the fact that every three years, the European Commission publishes a report that reviews the current and future adequacy of old-age incomes in EU member states in three dimensions – poverty prevention, ability to replace income received before retirement and retirement duration – and analyzes key reforms aimed at ensuring the financial sustainability of pension systems. Such reforms are carried out in two main areas: revision of social contribution rates and expansion of financing from general government revenues, in particular, property, consumption, and environmental taxes. Conclusions. It has been found out that the abolition of USC as a stable source of financing the social insurance system in Ukraine will result in either its erosion or complete dismantling of the welfare state. This may complicate our movement towards the EU due to the inconsistency of Ukrainian approaches to solving social problems with European ones.

Proposal for calculating regulatory capital requirements for reverse mortgages

In the current context in which many people worry about the sustainability of pension systems, reverse mortgages are gaining popularity because they are a way to supplement elderly people's incomes. However, it is necessary to provide banks with an adequate risk measurement and management procedure for reverse mortgages to increase the commercialization of these products, which will result in greater well-being for the retirement age population. In this paper, we propose a method to measure risk and estimate the regulatory capital requirements for a portfolio of reverse mortgages owned by a financial institution according to Basel II and III. The method considers house price risk, mortality risk and interest rate risk; consequently, regulatory capital requirements need to be computed using a Monte Carlo simulation procedure. The proposed method is general and can accommodate several scenarios for reverse mortgage specifications, including fixed or variable mortgage rates and different income stream schemes (with the lump sum as a particular case). The results for the U.K. show that reverse mortgage providers face higher risk when the lender initially advances a higher amount, with the lump-sum case indicating the highest risk, for relatively younger borrowers, the female population, higher interest rates and floating mortgage rates.

Priming or learning? The influence of pension policy information on individual preferences in Germany, Spain and the United States

A promising approach to pension policy preferences focuses on the influence of policy related information. We advance this research programme by examining the impact of information about future pension benefits, including whether information effects occur through priming, learning or both. Drawing on a novel, split-sample survey experiment in the US, Germany and Spain, we examine the impact of information on forecasted pension replacement rates for 2040 on pension policy attitudes. Findings indicate that the information treatment increases support for the two outcomes considered: (i) increases in the pensionable age and (ii) greater spending on pensions relative to other social programmes. Analyses of heterogeneous treatment effects accounting for prior beliefs of participants show that information effects occur both through priming and learning. The study concludes that hard, non-partisan information increases support for reforms that foster the financial sustainability of pension systems, although the scope of information effects depends on contextual conditions.

Comparison of the Pension Systems between Iceland, Netherland, and Thailand: Lessons for the Pension System Reform of Indonesian Civil Servants

The current implementation of the civil servant (PNS) pension program still has many problems that have a major impact on the adequacy and sustainability of Indonesia's pension system. This study aims to take lessons from a comparison of pension systems in Iceland, Netherland, Thailand, and Indonesia. The results of the discussion provide several recommendations or suggestions for civil servant pension programs which are currently in the process of being reformed. The Indonesian government needs to consider the high transition costs and the performance of pension funds, as happened in Netherland if it wants to change the pension scheme to a defined contribution. Based on this study, the fully funded method that is planned to be implemented does not always reduce the funding burden. Hence, learning from Thailand, civil servant pensioners should consider using a partially funded financing system as an initial step for civil servant pension reform. In addition, the government also needs to consider increasing the minimum retirement age which is determined based on the life expectancy of the Indonesian people. To support this proposal policy (increase the retirement age), so Indonesian government needs also plan programs related to the development of employee skills and competencies. This is very important to keep older employees productive in the workplace or organization.

Пенсионные системы государств Центральной Азии

Orientation towards the formation of the Eurasian socio-economic space implies the coordination of social policy, including in the field of pension provision. The harmonization of pension systems involves an analysis of the conditions for the formation and main parameters, the identification of common features and differences, and the determination of development prospects. The key problems of pension systems in the countries of Central Asia are the limited coverage of working people with pension insurance combined with a low basis for calculating pension contributions. The demographic factor plays a dual role in the functioning of pension systems. The countries of the region are characterized by a low proportion of older populations coupled with high rates of aging. At the present stage this can be seen as a demographic bonus, but in the long term it will become a serious challenge for the sustainability of pension systems. The situation is aggravated by the high migration outflow of the able-bodied population. One of the ways to increase the stability of pension systems can be to increase the role of state pensions – the development of the state system of social protection of pensioners as the main link in the pension system supplemented by private insurance and funded payments.

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.

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.

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.

Comparison of the World’s Best Pension Systems: The Lesson for Indonesia

Iceland and the Netherlands presently have the best pension systems in the world, according to the Mercer CFA Institute Global Pension Index 2021. In the meantime, Indonesia ranked 35th. This study compares and analyzes Iceland’s and the Netherlands’ current pension systems as the finest in the world, as well as the future threats to their pension systems, and applies the lessons learned from both nations to Indonesia, which intends to alter its public pension system. According to a comparative analysis of Iceland, the Netherlands, and Indonesia, the overall pension systems of Iceland and the Netherlands are advantageous for ensuring adequacy and sustainability of the pension system. However, Iceland and the Netherlands may suffer adequacy and sustainability issues in the long run. As a result, they should continue to evaluate their own countries’ present structures, notably in demographics. Concerning the Indonesia pension system, Indonesia policymakers should consider enforcing the social security system, since these systems have enabled Iceland and the Netherlands to have lower poverty rates. Furthermore, the Indonesian government should strengthen the existing PAYG and DB pension systems, raise the minimum pension eligibility age, contribute to the system regularly, and apply the cost-of-living adjustments to improve the adequacy and sustainability of the civil service pension system. Simultaneously, civil servants should contribute more to ensure the long-term viability of this pension system. The Indonesian government should implement such adjustments, as they would enhance budgetary sustainability in the long run.

The Logical Sustainability Theory for pension systems: the discrete-time model in a stochastic framework under variable mortality

Abstract The aim of this work is to provide the logical sustainability model for defined contribution pension systems (see [1], [2]) in the discrete framework under stochastic financial rate of the pension system fund and stochastic productivity of the active participants. In addition, the model is developed in the assumption of variable mortality tables. Under these assumptions, the evolution equations of the fundamental state variables, the pension liability and the fund, are provided. In this very general discrete framework, the necessary and sufficient condition of the pension system sustainability, and all the other basic results of the logical sustainability theory, are proved. In addition, in this work new results on the efficiency of the rule for the stabilization over time of the level of the unfunded pension liability with respect to wages, level that is defined as β indicator, are also proved.

URGENCY OF PENSION REFORM IN GEORGIA

The article discusses the urgency of pension reform in Georgia. The disadvantage of the existing pension model was its pressure on the state budget. At the same time, the recent demographical changes in Georgia revealed new challenges and put at risk the sustainability of the future state pension system; The previous pension system in Georgia would not have provided the old aged citizens with so called “Decent pension” that’s why there was an emergency of a new reformation. It is worth mentioning, that global aging is the history of world success. Nowadays people live longer. This is the triumph of social health security, shown up by establishing healthy life style, pharmaceutical market, generally citizens’ social-economic conditions and economic promotion as well. Aging process affects economic increase, formal and non-formal supporting system and mobilization of supporting resources for elderly citizens from the Government’s side. Nations should admit the global context of the problem, realize new demographic reality; However making some corrections in pension policy might be painful for elderly groups. Key words: Relevance of reformation, demographic changes, active aging, budget pressure, usefulness of the reform , rate replacement, accumulating pension system, pension indexation.

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.

Analyzing How the Social Security Reserve Fund in Spain Affects the Sustainability of the Pension System

Faced with the need to adjust public pension systems to meet changing demographic, economic and social conditions, most developed countries have created government reserve funds to ensure macroeconomic sustainability. This paper aims to study the importance that this reserve fund plays in the sustainability of the Spanish public pension system. Using data for the 2000 to 2019 period (20 observations) on the main variables impacting on the system, we calculate probabilities and other indicators of its unsustainability in relation to the reserve fund. Our model accurately reflects certain aspects of the data, and suggests that the probability of unsustainability is inversely associated with the size of the reserve fund, but that this relation is moderated by the heterogeneity of the members of the pension system. Moreover, the probability of unsustainability increases in line with the pension system deficit, the time elapsed until unsustainability is reached is shorter when the Reserve Fund balance falls, and the size of this fund at which the system becomes unsustainable diminishes with the probability of unsustainability.

Exploring behavioral barriers and interventions in retirement savings: Findings from online focus groups among university students

In a number of countries around the world, population ageing raises concerns about the sustainability of pension systems. A younger generation has conventionally been least likely to save for retirement even if there is a need to take individual responsibility and start saving for their retirement as soon as possible. In this context, the aim of the paper is to identify behavioral barriers and interventions towards retirement savings ceiling to this part of the productive population. For this purpose, three online focus groups were deployed among 16 university students aged 23-24 years. Using the coding process, common categories, related codes and frequencies of responses were determined from the transcribed material. The results pointed at two crucial barriers related to retirement savings: behavioral (present bias, status quo bias, loss aversion, limited attention) and institutional (education, pension policy and trustworthiness of the state institutions). Additionally, three main categories of behavioral interventions were detected to overcome these barriers: simplification of decision-making (easy calculation of pension, default options), use of salience effects (information campaigns, visualization tools, personalized content) and minimizing feelings of loss (framing of messages, financial incentives, products with different types of liquidity). Based on findings, recommendations were formulated for three groups of stakeholders: government, industry (financial providers and pension funds) and employers. The results bring valuable insights to relevant stakeholders regarding behaviors and attitudes of the young generation on retirement savings issues. AcknowledgmentsThis contribution was written with the support of the Technology Agency of the Czech Republic, project number TL03000737 titled as “Behavioral economics as a population activation targeted tool within use of financial security banking products.”

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.

Adequacy, Affordability and Sustainability of Pensions in Higher Learning Institutions in Zambia

Old-age poverty is as old as the human race, yet to this day, the fight against this beast rages. The fight against old-age poverty is certain, and so is the need to provide retirement income. The stakeholders of the University of Zambia (UNZA), Copperbelt University (CBU) and Mulungushi University (MU), particularly the government, expressed sustainability and affordability concerns over the existing pension systems in the three public universities. Eventually, the government directed the institutions to undertake pension reform to abolish second pillar plans. The study aimed to evaluate the adequacy, affordability and sustainability of pension systems at UNZA, CBU and MU. The study adopted a quantitative approach in which adequacy, affordability and sustainability indicators of the pension system were assessed considering data recorded within the last ten years. Survey questionnaires were used to gather data from 360 respondents. Data were analysed using SPSS Pearson correlations to evaluate the relationships between variables and sensitivity analysis techniques. Quantitative information was gathered from the financial statements of the universities over a ten-year horizon. The results indicate that the pension systems are adequate at the Zambian HDI of 64 but inadequate at the Sub-Saharan HDI of 69. On the other hand, affordability and sustainability performance indicators highlighted the financial stress the existing pension systems exert on the financial position of the three institutions. The pension liabilities grew by an annual average of 41% for UNZA, 19% for CBU and 35% for MU. In addition, the gearing ratios stood at 265% for UNZA, 248% CBU and 81% MU. Pension liabilities expressed as a proportion of current assets; the ratios stood at 841% for UNZA, 336% for CBU and 25% for MU. The liquidity indicators demonstrate the financial challenges the universities face in paying retirees. The sensitivity analysis of the financial information projects continued growth of pension liabilities resulting in further delayed liquidation of pension benefits. Therefore, the study projects increased old-age poverty, which is detrimental to the performance and reputation of the higher learning institutions in Zambia. With the poor performance of key pension indicators, the public universities face the daunting task of reforming the existing models to fight old-age poverty. The fight against old-age poverty is a collective responsibility that should endeavour to improve the lives of retirees rather than exacerbate the situation as the directive to reform seems to cause in the public universities. The study recommends design concepts encompassing risk management, prefunding and key pension performance indicators as dictated by actuarial assumptions. Furthermore, the study recommends a pension model that embraces the critical key design principles that make the fight against old-age poverty easier without abandoning the financing mechanism.