Private savings and transition

After the collapse in the early transition years, saving rates in Eastern European EU‐accession countries have recovered strongly. But is private saving in these countries now driven by the same forces as in the EU? A GMM estimator is applied to analyze the determinants of private saving in both country groups. The main results are: saving rates are rather persistent; income growth increases saving, whereas public saving crowds out private saving. There is evidence that in both country groups domestic saving and foreign capital operate at least partly as substitutes, which is an indicator for international financial integration. The long‐run effects of income growth and public saving are larger in the EU‐15 than in the EU‐accession countries.     

Integration of world leaders and emerging powers into the Malaysian stock market: A DCC-MGARCH approach

This paper examines the financial integration of two world leaders (the U.S. and Japan) and two emerging powers (China and India) into the Malaysian stock market. A DCC-MGARCH approach is employed to examine the correlations among these countries in a time-variant manner to indicate the degree of financial integration among the countries. It is found that the financial integration between Malaysia and China started to evolve in April 2004. Strong financial integration between the stock markets in India and Malaysia was observed. In contrast, the volatility spillover effect from the U.S. to Malaysia disappeared, especially in the short term. Nevertheless, the study suggests that in the long run, investors in Malaysia could gain by diversifying their portfolios in China and Japan relative to India and the U.S.     

Uncertain Pension Income and Household Saving

This paper investigates the relationship between household saving and pensions, and estimates both the displacement effect of pensions on private saving and the precautionary saving effect due to uncertainty in pension income. I estimate the savings equation implied by a simple life‐cycle model featuring income uncertainty using survey data for Dutch households, with subjective expectations on pension benefits and uncertainty. Exploiting exogenous variation due to pension fund performance, I find that households save significantly more due to uncertainty in pension income. Not controlling for uncertainty biases the estimated displacement effect of pensions on private savings towards zero.     

The role of personality traits in pension decisions: findings and policy recommendations

Many countries need to stimulate pension participation and contribution to ensure their citizens are prepared adequately for retirement. Identifying at-risk groups with tendencies of not joining pension plans will help governments target strategies to improve pension awareness and participation. This study investigates the role of personality traits in pension decision making using data from the UK Household Longitudinal Study. Our results demonstrate that Extraversion significantly correlates with non-participation in private pensions, including both employer run and personal pensions. Individuals who are high in Conscientiousness are more likely to participate and pay more into personal pensions. Openness to experience is negatively correlated with saving via personal pensions. Agreeableness and Extraversion correlate inversely with the amount contributed to personal plans. This paper discusses our findings in detail and offers policy implications which may help promote pension participation and ease the problem of old age poverty.     

Optimal Decisions on Pension Plans in the Presence of Information Costs and Financial Literacy

Pension reforms are on the political agenda of many countries. Such reforms imply an increasing responsibility on individuals’ side in building an efficient portfolio for retirement. In this paper, we provide a model describing workers’ choices on the allocation of retirement savings in presence of (1) mandatory pension contribution; (2) different pension plans; and (3) information costs and financial literacy investment decisions. In particular, we characterize the results from both a positive and normative standpoint, by highlighting the determinants of individuals’ choice, with special focus on information costs, on the role of income and preferences, and by characterizing the optimal contribution rate to mandatory complementary pension plans. We also introduce endogenous financial literacy and analyze how its optimal level is determined and how it affects the decisions on pension plans.     

Ricardian equivalence and the public and private saving nexus in India

This study tests the Ricardian equivalence theorem (RET) and examines the responsiveness of private saving to public saving in India. Most estimators do not provide support for the empirical validity of RET and long-run cointegration between public and private saving. The increases in household saving (HHS) seem to have been engendered by the provision of saving incentives, institution of saving schemes, self-driven motivation to save, and the precautionary accumulations induced by uncovered uncertainties in incomes, rather than by Ricardian behaviour of households. The self-imposed aversion to debt and debt bequest, borrowing and liquidity constraints, and the intertemporal smoothing of consumption have been the added catalysts that contributed to the increases in HHS. The households with binding borrowing constraints, inadequate or no insurance and uncovered uncertainties in incomes seem to have been saving more to pay for higher inflation-tax. The fiscal consolidation and generation of public saving are essential to reduce the tax burden (both explicit through fiscal taxes and implicit through inflation-tax), minimize the likelihoods of economic and financial crises, and maintain the internal and external value of domestic currency.     

Spatial contagion in the subprime crisis context: Adjusted correlation versus local correlation approaches

This paper investigates the influence of the spatial dimension on financial contagion in the subprime crisis based on adjusted and local correlation measures. Daily series of stock indexes of American and Asian countries are used from January 1, 2003, to December 30, 2011. We consider two groups of countries: the first group includes the United States and countries that are geographically close: Brazil, Argentina, Mexico, and Canada. The second group includes countries that are geographically distant from the United States: Hong Kong, India, Australia, Indonesia, Malaysia, South Korea, China, and Singapore. The results show that simple and adjusted correlations are not enough to explain the spatial effect of contagion. Using local correlations and polynomial regressions, the results show the existence of spatial contagion between the United States and all countries in the American region. As for countries that are geographically distant from the United States, we prove the existence of spatial contagion between only some groups of countries (United States/India, United States/Australia, United States/Indonesia, United States/Malaysia, United States/China). These results have international diversification, and within-industry implications.     

Do tax subsidies for retirement saving affect total private saving? New evidence on middle-income workers*

We exploit exogenous variation from a pension reform in Denmark to estimate the effect of tax subsidies on total private saving. We present new evidence on individuals in the middle of the income distribution and show that a reduction in tax subsidies for retirement saving reduces total private saving. The reform changed the tax incentives for saving in the pension scheme that holds the highest tax advantage for middle-income workers in Denmark. We find that for each unit of reduced saving in this pension scheme, only 64 percent is substituted to other types of saving.     

Age and cohort effects in saving and the German retirement system

As the public pay-as-you-go pension systems of the ageing industrialized countries are likely to become seriously strained under the growing dependency burden, the question arises whether a society should rely on private savings to finance old-age consumption. This is an empirical question about the magnitude and the flexibility of saving rates. This paper argues that saving rates must increase in an unprecedented fashion in order to compensate for the dependency effect.The paper takes the German case as an example. It analyses saving behaviour in Germany using three waves of the Income and Expenditure Survey. It separates age and cohort effects; computes the demographics induced change in the aggregate saving rate; and compares the magnitude of these excess savings with the increasing burden of the pension system. Finally, a macroeconomic simulation model is used to explore possible paths of the cohort effects in saving rates.     

Determinants of private savings behaviour in Turkey

This study investigates the effects on private saving rates of a number of policy and non-policy variables. The analysis covers the period 1968–1994. The empirical private saving model for Turkey is estimated. The findings support the hypothesis that private saving rates have strong inertia. The evidence indicates that government saving does not tend to crowd out private savings and the Ricardian equivalence does not hold strictly. Income level has a positive impact on private saving rate, and growth rate of income is not statistically significant. From a policy point of view, financial depth and development measures in Turkey suggest that countries with deeper financial systems tend to have higher private saving rates. Private credit and real interest rates try to capture the severity of the borrowing constraints and the degree of financial repression for Turkey. Moreover, the negative impact of life expectancy rate lends support to the life-cycle hypothesis. The precautionary motive for saving is supported by the findings that inflation captures the degree of macroeconomic volatility and has a positive impact on private saving in Turkey.     

THE GENDER GAP IN PRIVATE PENSIONS

In many western countries, older women receive considerably less private pension income than older men on average. We analyse this differential in Britain, examining differences between the sexes both in private pension coverage and in pension income conditional on receipt. Using regression‐based decompositions, we show that both gender gaps are associated mainly with differences in returns to personal characteristics rather than with differences in personal characteristics per se.     

中国企业年金税收优惠政策的比较与选择

2005年,随着首批金融机构获得企业年金经办资格认证,中国企业年金保险进入到具体实施阶段.然而,直到2006年底,关于企业年金的缴费方式、基金的投资管理、给付机制、法规监管以及税收优惠政策等一系列相关问题仍未解决,成为严重制约企业年金市场发展的瓶颈.本文着重从企业年金税收优惠政策的比较与选择入手,结合城镇基本养老保险的情况,通过核算国家税式支出、企业年金积累额等指标,对国家采取适当的企业年金税收优惠政策去引导和促进企业年金市场的发展提出理论依据.     

Public or Private Orientation of Pension Systems in the Light of the Recent Financial Crisis

This paper studies the appropriateness of a public or private orientation of pension systems in the light of the recent financial crisis, which has underscored the difficulties and contradictions associated with each system. The different institutional arrangements, in which public or private pension systems are embedded, are key components when assessing their responses to the crisis. Particularly, private pension systems are intertwined with financial markets, while social insurance-based pension systems are linked to the labour market mechanisms. This paper compares the British and French pension systems, as “archetypes” of private-oriented and public-oriented systems, respectively, the first relying on the market and private pension schemes, and the second on mandatory social insurance. This paper shows that the crisis has upheld the founding principles of the public (French) and private (British) pension systems to maintain the existing institutional configurations. At the same time, both systems have strengthened the role played by means-tested benefits and minimum pensions for low-income groups to offset the weaknesses of one or the other system, as emphasised by the crisis.     

The German Savings Puzzle

Germany has one of the most generous public pension and health insurance systems of the world, yet private savings are high and remain positive until old age, even for most low income households. How can we explain what we might want to term the “German savings puzzle”? We provide a complicated answer that combines historical facts with capital market imperfections, housing, tax and pension policies. The first part of the paper describes how German households save, based on a synthetic panel of four cross sections of the German Income and Expenditure Survey (“Einkommens- und Verbrauchsstichproben”) collected between 1978 and 1993. The second part links saving behaviour with public policy, notably tax and pension policy.     

Overview of the Portuguese Three Pillar Pension System

In order to cope with alleged future financial problems, several changes were made to the design of the Portuguese pension system since 2000. The aim was to achieve the diversification of retirement income sources across providers, both public and private, across the three pillars: public, industry-wide, and personal, and also across the financing forms of pay-as-you-go and funded. This paper describes these changes and analyses the results regarding, principally, the weight of each pillar and the investment performance of both public pension reserves and private pension funds. The main finding is that, in effect, there is one substantial longstanding pillar, and that is the public system.     

不同养老保障机制与家庭储蓄率——基于世代交叠模型的实证研究

目前,我国的养老保障机制采用以社会养老保险为基础的多渠道养老保险机制,家庭成员赡养、个人金融投资和养老保险就成为了三种主要方式。这一结论已经得到了学术界的广泛认可,然而我国不同养老渠道之间的比例和关系尚缺乏实证研究。家庭自主的金融资产投资、家庭成员之间的赡养效果还没有得到充分的检验。文章基于2008年和2009年的中国家庭追踪调查(CFPS)数据,首次运用2005年政策调整后的数据进行实证研究,对我国养老金财富、个人金融投资以及家庭成员赡养率之间的关系进行了分析研究。文章根据传统的世代交叠模型,针对现有数据,建立了一个三期世代交叠模型,然后分析了不同渠道养老保险收入对家庭储蓄率的影响。研究结果表明,基本养老金财富与个人金融投资对非退休人群的储蓄有显著的负向影响,退休者的储蓄率主要受家庭成员赡养影响,并且呈负相关的关系。     

Measuring the time‐varying effects of fiscal policy on private saving in the process of financial integration

This paper investigates the effects of fiscal policy, measured as the extent to which private saving is offset by public saving, in the process of international financial integration. Using extensive panel data for 87 countries over the period 1970–2010, we find that the dynamics for the saving offset are highly nonlinear and time‐varying. While the saving offset has gradually declined in line with rapid financial integration in advanced economies, it has remained broadly stable in less financially integrated emerging and developing economies. This implies that the negative wealth effects of fiscal policy in advanced economies have been smaller owing to higher financial integration, which could help governments reduce their debt burdens through the well‐anchored domestic interest rates at the world level.     

Why do Households Leave Money on the Table? The Case of Subsidized Pension Products

Abstract

Many individuals only save money in their savings account for their old-age provision rather than investing in more profitable asset classes. That is despite the existence of subsidized pension products, for which smallest contributions can be made monthly, which guarantee the capital preservation, and which offer higher expected returns than saving money in bank deposits. We investigate the determinants that affect individuals’ decision to leave money on the table by not investing in subsidized pension products. Our results show that financial literacy and financial advice are positively related to holding such pension products. In that, our results emphasize the role of financial literacy and financial advisors for sound financial decision-making in increasingly complex financial markets.     

Taxes,Retirement Transfers,and Annuities*

In most countries, retirement benefits from pension saving must be taken as an annuity. By contrast, Australia allows benefits to be taken as a lump sum, and instead has recently introduced various tax incentives to encourage annuity purchase. This paper investigates the effectiveness of these tax concessions, and concludes that they do little to achieve this objective This is because they are nullified by the provisions of the broader tax and social security framework within which Australian private pension policy is set     

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.