What can we Learn from Generational Accounts for the United Kingdom?

This paper considers the relevance of a set of generational accounts in informing policy debate in the UK. With regard to transparency, Generational Accounts can, under sensible assumptions, provide a useful summary statistic to supplement our analysis of government policy. Interpreting differences in the accounts across groups as measures of the incidence or redistributiveness of existing or proposed policies is more problematic. With respect to UK pension reform, within-cohort differences raise important issues. Finally we argue that past pension reforms have been characterised by inaccurate forecasts as opposed to a lack of understanding of the generational incidence of proposed policy.     

The effects of recent Spanish pension reforms on sustainability and pension adequacy

The Spanish pension system has been recently reformed as a response to the demographic challenge and with the objective of ensuring the sustainability of the pension system in the long-term. The overall reforms include changes in the majority of the system parameters, a new indexation rule and a sustainability factor that links life expectancy and the first pension amount. The aim of this work is to analyse how these reforms affect two important features of a pension system: fiscal sustainability and adequacy. For this purpose, the real internal rate of return (IRR) of the lifetime contributions and benefits and the prospective gross theoretical replacement rate (TRR), both before and after the reforms, have been computed. The calculations are case-study based, for a few hypothetical workers who are sufficiently representative of the earnings and retirement patterns in Spain. The results show that the real IRR is 0.7 p.p. lower and the prospective gross TRR is 18 p.p. lower after the reform process for the base case of a man with an uninterrupted career of 40 years with average earnings and a retirement age of 65. In addition, pension reform process in Spain has different effects among the individuals depending on the gender, level of earnings, retirement age and career length.     

Retirement expectations, pension reforms, and their impact on private wealth accumulation

We estimate the effect of pension reforms on households' expectations of retirement outcomes and private wealth accumulation decisions exploiting a decade of intense Italian pension reforms as a source of exogenous variation in expected pension wealth. The Survey of Household Income and Wealth, a large random sample of the Italian population, elicits expectations of the age at which workers expect to retire and of the ratio of pension benefits to pre-retirement income between 1989 and 2002. We find that workers have revised expectations in the direction suggested by the reform and that there is substantial offset between private wealth and perceived pension wealth, particularly by workers that are better informed about their pension wealth.     

Intergenerational policy and the measurement of tax incidence

We evaluate the ability of generational accounting to assess the potential welfare implications of policy reforms. In an intergenerational context policy reforms usually have redistributive, efficiency, and general equilibrium implications. Our analysis shows that when the policy reform implies changes in economic efficiency, generational accounts can be misleading not only about the magnitude of welfare changes, but also about the identity of who wins and who losses. In contrast, the generational accounts correctly identify welfare changes when the policy reform has only a pure intergenerational redistribution component. We illustrate and quantify this issue in the context of widely considered policy reforms (substitution of consumption for labor taxation, and the increase of retirement age) and in a more general context of optimal policy.     

Building and Interpreting Macro/Micro Estimates of Accrued‐to‐Date Pension Liabilities: French Reforms as a Case Study

Estimates of accrued‐to‐date pension liabilities (ADL) should become more widely accessible to statisticians and decision makers in the near future, in application of new SNA requirements. This raises two questions: how can such estimates be routinely produced, and what for? Microsimulation helps in answering the first question of the “how.” It allows ADL computations that take into account the complexity of pension rules. Concerning the “what for” question, it is known that ADL are not an indicator of global financial sustainability. Messages they convey are more interesting at the micro level, from a household perspective. This fosters the case for microsimulation which spontaneously generates consistent micro/macro results. We illustrate these points using the French situation as a case study. We emphasize one aspect of French reforms that may concern other countries as well: the move to price indexation and the connection it creates between sustainability and growth assumptions.     

Social security and retirement incentives in Austria

This paper provides an overview of the interaction between social security and retirement behavior in Austria in the decades up to the on-going reform process. The key question is, how much of the retirement behavior can be attributed to incentive effects of the pension system. We describe the labor market and retirement behavior of the elderly in Austria, survey the key features of the public pension system and finally present the results of a series of simulations aimed at assessing the retirement incentives generated by the pension system. We compute levels and accrual rates of social security wealth and implicit tax rates on continued work according to the method portrayed in Gruber and Wise [Gruber J, Wise D (1999) Social security and retirement around the world. University of Chicago Press, Chicago London]. To some extent, the sharp drop in labor force participation among the elderly must be attributed to major disincentives of the Austrian pension system; the system turns out to provide significant incentives to retire early. Past reforms have reduced the disincentives. Our results, however, show the need to further reform the public pension scheme and to reorient it stronger towards the principle of actuarial fairness.     

中国代际核算体系的建立和对养老保险制度改革的研究

代际核算方法是 2 0世纪 90年代出现的分析财政问题和代际平衡问题的新方法。本文建立了中国的第一套代际核算体系 ,并利用代际核算体系分析了中国的养老保险体系。考虑到中国的实际情况 ,本文对传统的代际核算体系进行了以下扩展 :首先 ,传统的代际核算体系将人口按照年龄和性别分类 ,而我国无论是税收体系还是养老保险体系 ,城乡差别都比较大 ,因此我们将人口按照年龄、性别和城乡三个维度分开 ;第二 ,由于我国的社会保障体系不是全民覆盖 ,因此我们在考虑社会保障体系的缴费和支付时 ,需要考虑覆盖面的变化。核算结果表明我国城乡不平衡很严重 ,城镇人口到 55岁 (其中女性到 50岁 )时代际帐户就为负值 ,而农村人口要到 85岁 (其中女性到 90岁 )代际帐户才为负值。我国的代际不平衡也较为严重 ,按照不同的生产率增长率和贴现率的假设 ,我国未来代的代际帐户值比 2 0 0 2年新出生一代高 66%到 1 0 2 %。而如果我们采用延长退休年龄的政策 ,代际不平衡情况可以得到很大改善 ,未来代的代际帐户值比 2 0 0 2年新生代高 43 %到 81 %。而如果不对机关事业单位的养老保险制度进行改革 ,代际不平衡状况将更加严重 ,未来代的代际帐户值比现存各代高出 78%到 1 1 5%。     

Do the French pension reforms increase re-employment of older unemployed workers?

ABSTRACT

The sustainability of Social Security financing has pushed authorities to reform their policy to increase the labour market participation of older workers. While most of the studies have focused on the consequences of pension reform on retirement decisions, we analyse the effects of two French pension reforms, which increased the period of contribution and the minimum retirement age, on transitions out of unemployment and into employment with a difference-in-differences approach. We find that both retirement reforms have positive effects on the re-employment of older unemployed workers. The pension reforms are also accompanied by an increase of the transitions into inactivity. The results suggest that the reforms have delivered significant effects by reducing the unemployment of older workers.     

Pension Reforms: An Illustrated Basic Analysis

The paper examines pension reforms under population ageing.The concepts of "implicit pension debt", "implicit tax" and"internal rate of return" are first introduced with the helpof a three-period model. Using stylised facts, ageing is tracedto low fertility and increasing longevity. Formulating a benchmarkfor intergenerational fairness leads to a framework for designingpension reforms such that leaving an unfair burden to futuregenerations is avoided. Secondly, a yearly simulation modelis used to arrive at the following main results for reform blueprints: (1) In a Defined Benefit (DB) system, partial pre-funding isneeded to achieve intergenerational fairness unless benefitsare sufficiently reduced; partial privatisation is an optionfor the management of the accumulating funds. (2) Transition from a DB to a Notional Defined Contribution(NDC) system is another reform option; it reduces the replacementrates to levels which match prescribed contribution rates; anNDC public pillar can be accompanied by a second pillar, managedby the private sector. (3) An effective increase in the retirement age is necessaryto moderate the increase in pension expenditure and to preserveadequate pension levels. (4) Pension reforms have important effects on public financetarget setting. (JEL H1, H5, H6)     

养老保险个人账户调整对我国财政体系代际平衡状况的影响

养老保险体系对财政政策的代际平衡状况有重要影响,我国养老保险个人账户规模缩小至8%可以使代际不平衡状况下降10个百分点,而降低养老基金保值率对改善代际不平衡状况的作用有限。因此我们在缩小个人账户规模后,应该考虑尽快将个人账户“做实”,通过提高养老基金保值率来激励单位和个人参加养老保险。     

Endogenous retirement and public pension system reform in Spain

Population aging has spurred developed countries around the world to reform their PAYG pension systems. In particular, delaying legal retirement ages and reducing the generosity of pension benefits have been widely implemented changes. This paper assesses the potential success of these policies in the case of the Spanish economy, and compares them with the results obtained by the (rather modest) reforms already implemented in 1997 and 2001. This evaluation is accomplished in a heterogeneous-agent dynamic general equilibrium model where individuals can adjust their retirement ages in response to changes to the pension rules. We check the ability of the model to reproduce the basic stylized facts of retirement behavior (particularly the pattern of early retirement induced by minimum pensions). The model is then used to explore the impact of pension reforms. We find that already implemented changes actually increase the implicit liabilities of the system. In contrast, delaying the legal retirement age and extending the averaging period in the pension formula to cover most of the individual's life-cycle can reduce the implicit liabilities substantially. These findings reveal the failure of the Spanish political system to distribute the costs of population aging more evenly across the generations.     

Pension Reform, Capital Markets and the Rate of Return

Abstract. This paper discusses the consequences of population aging and a fundamental pension reform – that is, a shift towards more pre‐funding – for capital markets in Germany. We use a stylized closed‐economy, overlapping‐generations model to compare the effects of the recent German pension reform with those of a more decisive reform that would freeze the current pay‐as‐you‐go contribution rate and thus result in a larger funded component of the pension system. We predict rates of return to capital under both reform scenarios over a long horizon, taking demographic projections as given. Our main finding is that the future decrease in the rate of return is much smaller than often claimed in the public debate. Our simulations show that the capital stock will decrease once the baby‐boom generations enter retirement, even if there were no fundamental pension reform. The corresponding decrease in the rate of return, the direct effect of population aging, is around 0.7 percentage points. While the capital market effects of the recent German pension reform are marginal, the rate of return to capital would decrease by an additional 0.5 percentage points under the more decisive reform proposal.     

中国城镇养老保险制度改革的收入分配效应

在公共养老保险制度下,可以通过调整养老保险的缴费率或养老金计发办法来影响参保人一生中的养老金纯受益,从而实现代际间和代际内的收入再分配。本文利用中国国家统计局2002年的城市住户调查数据,分别估计城镇参保职工在1997年养老保险制度和2005年最新养老保险制度下的终生养老金纯受益,并以此从代际间和代际内的角度对中国养老保险制度改革的收入分配效应进行定量分析。分析表明:在1997年的改革方案下改革前的养老保险制度中存在的逆向收入转移效果得到改善;但在2005年改革方案下,2002年时40岁以上的群体中存在较明显的逆向收入转移倾向。另一方面,从代际分配来看,1997年改革方案的代际不平衡大于2005年改革方案;在2005年改革方案下各代人的养老金纯受益都有所提高,但这是以养老保险制度的缴费率和养老金计发办法不变,养老财政收支能维持平衡以及参保人在整个工作期间按规定缴费为前提的。     

Backing out of private pension provision: lessons from Germany

Financing pensions in the EU is a challenge. Many EU countries introduced private pension schemes to compensate declining public pension levels due to reforms made necessary by demographic change. In 2001, Germany introduced the Riester pension. Ten years after introduction the prevalence rate of this voluntary private pension scheme approximates 37 %. However, numerous criticisms raise doubts that the market for Riester products is transparent. Using the 2010 German SAVE survey, this article investigates terminated and dormant Riester contracts on a household level for the first time. Respectively 14.5 and 12.5 % of households who own or have owned a Riester contract terminated or set dormant their contract. We find that around 45 % of terminated or dormant Riester contracts are caused at least partly by product-related reasons, which is significantly higher than for endowment life insurance contracts. The uptake of a new contract after a termination is more likely if a termination is product-related. Nevertheless, after a termination 73 % of households do not sign a new contract, which can have serious long-term consequences for old-age income. Households with low income, low financial wealth or low pension literacy are more likely to have terminated or dormant contracts. Low income and low financial wealth households also have the lowest prevalence rate of Riester contracts and are at higher risk of old-age poverty.     

The welfare of pensioners during economic transition: an analysis of Hungarian survey data1

This paper examines the welfare of pensioners over the early transition period 1987-93 in Hungary. We describe the pension system in detail, and demonstrate the tendency towards compression of the pensioner income distribution towards low income which is induced by the rules and indexation provisions of the pension system. We use the Hungarian Household Budget Surveys to analyse the growth of poverty among the pensioner population and to compare their experience with two other distributionally sensitive groups: households with children and households affected by unemployment.     

Effects of future pension benefits on pre-retirement labor supply: Evidence from Chile

In this paper, I estimate the effect of future pension benefits on pre-retirement labor supply for a representative sample of Chilean workers. Using nonlinear patterns in pension benefit formulas and a reform that permanently changed non-contributory pensions, I estimate the effect of pension accrual and expected pension wealth on labor force and contributory-sector participation, labor earnings, and hours worked. I find that the effect is concentrated on the impact of pension accrual on the probability to contribute to the pension system. The effect is heterogeneous and is concentrated among middle-aged workers, low-skilled workers, and workers with higher financial literacy.     

Measuring and explaining implicit risk sharing in defined benefit pension funds

This article investigates responses to changes in solvency by occupational pension funds using a unique panel data set containing the balance sheets of all registered pension funds in the Netherlands over a period of 13 years (1993–2005). A fixed discount rate for liabilities in the supervisory framework allows us to measure the response of pension funds to solvency shocks. We find that pension rights are expanded, by e.g. indexation, or limited, by for instance setting the pension premium over its actuarially fair price, in line with the funding ratio but that the pension funds’ response function exhibits two sharp and significant behavioural breaks, close to the minimum funding ratio of 105% and the target ratio of around 125%. We further find that large funds and grey funds are relatively generous to current participants.     

Why Sweden's pension reform was able to be successfully implemented

Governments that do not reform pay-as-you-go (PAYG) pension systems will eventually face a pension crisis. In a democracy, reforms require majority support. The problem is that pension reform requires today's generation to bear the burden to avoid burdening tomorrow's generation. Sweden recently passed pension legislation that specifies a gradual transition from a public defined-benefit plan to a defined contribution plan. Why was Sweden successful in reforming its pension system? We find that a political economy perspective helps to answer this question: there are more winners who would vote in favour of the reform than non-winners who would vote against it. When comparing the net effect (present value of expected benefits minus present value of remaining contributions) of the new and old systems, contributions of the working generation (age < 53) are reduced by more than their expected benefits.     

Delaying retirement in Spain

We study the reform of the Spanish public pension system in a multiperiod, general equilibrium, overlapping generations model economy populated by heterogeneous households. Our households differ in their place of birth, in their age, in their education and, endogenously, in their employment status, in their wealth, and in their pension entitlements. They receive a stochastic endowment of efficiency labor units each period. And they face a disability risk and a survival risk. They understand the link between the payroll taxes that they pay and the public pensions that they receive. And they decide how much to consume and to work, and when to retire from the labor force. We calibrate this economy to Spanish data, and we use it to study the consequences of delaying three years the statutory retirement ages in 2010. We find this reform is sufficient to solve the sustainability problems that plague the current Spanish public pension system. Our model economy predicts that under the current rules, the pension system fund will run out in 2028 and in the reformed economy it will last until 2050. We also find that it is moderately expansionary, and that it improves social welfare from the year 2015 onwards. We conclude that policymakers should seriously consider delaying the statutory retirement ages in Spain sometime in the near future.     

Shifting from pay-as-you-go to individual retirement accounts: A path to a sustainable pension system

With aging demographics and generous pension programs, the sustainability of the pay-as-you-go (PAYG) public pension system has been often questioned and has motivated policymakers to enact reforms in many countries. Although mandatory funded Individual Retirement Accounts (IRAs) appear to be a solution to this unsustainable system, existing reforms usually take place within the PAYG system by reducing pension benefits. This paper evaluates the effects of PAYG reforms as well as reforms that switch to the IRA system. Our analysis shows that PAYG reforms outperform IRA reforms in many aspects. In fact, PAYG reforms achieve higher GDP and yield higher welfare in the long run. The transition to the steady state is also found to be less volatile for PAYG reforms. While PAYG generally places a larger burden on future generations, the positive welfare effect of cross-subsidization dominates the welfare loss. Our findings may explain why pension reform is a controversial issue in most countries and why we rarely observe a shift to the IRA system.