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Welfare Reform on the Web (November 2011): Pensions - overseas

New Zealand's old-age pension scheme and household saving

J. Obben and M. Waayer

International Journal of Social Economics, vol.38, 2011, p. 767-788

The combination of observed low rates of private saving and projected increases in the fiscal burden of financing a pay-as-you-go defined benefits public pension scheme for an ageing population poses a major policy challenge for New Zealand. Policy discourses espouse pension reform and the redoubling of household saving efforts. However, some of the policy options available could have offsetting effects. This paper revisits the relationship between social security and household saving. Results from the model employed suggest that a policy to increase the legal retirement age may reduce the fiscal burden of the public pension scheme but, in shortening the post-retirement period that households have to save for, it may also reduce the saving rate. The other findings are consistent with expectations: increases in disposable income increase saving; there is a significant tendency to consume out of household net wealth; and inflation and unemployment engender significant precautionary saving.

Retirement plan participation in an era of change: the case of a rural region

E.A. Whitaker, J.L. Bokemeier and S. Loveridge

Rural Sociology, vol.76, 2011, p. 319-346

In the US, the public pension system, Social Security, is under strain and it is projected that outlays will exceed revenues by 2017. At the same time the predominant form of employer-sponsored retirement plan has changed from defined benefit to defined contribution, transferring risk to employees. These developments mean that it is crucial for individuals to build up their own retirement savings. Rural communities are vulnerable to these changes, given their higher proportion of elderly and more who rely on Social Security. Using a telephone survey of working age residents in Michigan's Upper Peninsula, this research investigated factors associated with participation in tax-advantaged retirement plans that have largely replaced defined benefit pension plans for retirement savings. The findings may inform policies to promote savings plan and retirement plan participation.

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