Welfare Reform on the Web (March 2008): Pensions - overseas

Children and pensions

A. Cigno and M. Werding

London: MIT Press, 2007

The rapidly aging populations of many developed countries, most notably Japan and member countries of the European Union, present obvious problems for the public pension plans of these countries. Not only will there be disproportionately fewer workers making pension contributions than there are retirees drawing pension benefits, but the youth-to-age imbalance will significantly affect the total contributive capacity of future generations and hence their total income growth. The book examines the way pension policy and child-related benefits affect fertility behaviour and productivity growth. It presents theoretical arguments to the effect that public pension coverage as such will reduce aggregate fertility and may raise aggregate household savings. It also argues that public pensions, as they are currently designed, discourage parents from private human capital investment in their children to improve the children's future earning capacity.

After an overview of pension and child benefit policies (focusing on the European Union, Japan, and the United States), it offers an empirical and theoretical analysis and a simulation of the effects of the policies under discussion. It also includes an innovative suggestion that relates a person's pension entitlements to his or her number of children and the children's earning ability, proposing that a person's pension could be financed in part or in full by the pensioner's own children.

The contractual trust arrangement

J. Hawkins, & D. Klauke

Life & Pensions Jan. 2008 p. 31-34

Voluntary funding by plan sponsors using contractual trust arrangements (CTAs) has become a feature of the German pension market. This article looks at common reasons for using CTAs and finds many of them do not stand up to scrutiny.

Designing a social security pension system

R.L. Brown

International Social Security Review, vol. 61, Jan.-Mar, 2008, p. 61-77

The paper suggests that policymakers need to keep the following principles in mind when designing a state pension system:

• Benefits will be paid for by a combination of taxes, contributions and investment income
• The system and its inner workings should be comprehensible to most of the population
• The benefit/contribution structure should not encourage workers to evade paying contributions by not declaring earnings or entering the cash economy
• It is preferable to have explicit drop-out provisions for contingencies such as caring for children or disability rather than to offer a significant benefit in return for a short workforce attachment
• It may be necessary to provide significant benefits to wealthy participants in order to guarantee their support for the system.
• The benefit/contribution structure should not encourage workers to retire early.

Male norms and female adjustments: the influence of care credits on gender pension gaps in France and Germany

P. Frericks, R. Maier and W. de Graaf

European Societies, vol.10, 2008, p. 97-119

In most European countries, the pensions system is based on compulsory contributions to an insurance scheme by workers in paid employment. Life-long, full-time employment is required to build up entitlement to a full pension. This system disadvantages women, especially mothers, who take career breaks or work part-time in order to care for children and elderly relatives. France and Germany have introduced child care credits to help women build up better pension entitlements. This article compares the two schemes.