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Welfare Reform on the Web - January 2001: Pensions - overseas

BERLIN PUTS OFF REFORM OF PENSIONS FOR A YEAR

R. Atkins

Financial Times, Nov. 8th 2000, p.11

The German government has delayed the introduction of state-supported private pension schemes intended to buttress the state pay-as-you-go pension by one year. The delay has come amid strong opposition to the reform by unions which object to planned cuts in state pension levels and want employers to carry a greater burden of retirement costs.

BRITAIN MAY HAVE TO PAY EU BILL ON PENSIONS

A. Evans-Pritchard

Daily Telegraph, Nov. 7th 2000, p.12

Expert report warns that France, Spain, Germany and Italy are facing a pensions timebomb as their generous pay-as-you-go systems will place an enormous strain on the public finances as the population ages. Calls for a radical reform of their pension systems with a "containment of benefits" and an increase in the retirement age.

CHINA TO CALL ON FOREIGNERS TO MANAGE PENSION FUNDS

J. Kynge and R. McGregor

Financial Times, Oct. 23rd 2000, p.8

Reports that China is planning to invite foreign financial institutions to help manage its pension funds. They will be investing both in domestic capital markets and abroad.

CURRENT AND FUTURE PROBLEMS OF CAPITAL ACCUMULATION IN THE CHINESE PENSION SYSTEM

J. Zhang, J. Chen and H.J. Rösner

International Social Security Review, vol.53, no.4, 2000, p.37-48

The statutory basic pension in China comprises a pay-as-you-go social insurance component and a funded individual component. If this system is to succeed it is vital that the full amount of contributions accumulated in individuals' personal accounts is paid out to them rather than being fraudulently diverted to other purposes. This appears to be a real danger due to:

  • state interference in investment decisions;
  • the temptation to use individuals' contributions to finance the pay-as-you-go element of the basic state pension;
  • lack of a solid legal basis for administratively independent funds.

EFRP'S PENSION PLAN COULD COMPLEMENT COMING EU DIRECTIVE

J. Marshall and S. Butterworth

Pensions International, no.23, 2000, p.16-17

Describes the European Federation for Retirement Provision's proposals for the creation of a European Institution for Occupational Retirement Provision to help facilitate freedom of movement for workers.

THE EUROPEAN WAY OF AGEING

R. Disney

Financial Times, Oct. 10th 2000, p.25

Advocates a new approach to keeping the state pension both adequate and affordable based on European models. Possibilities would be to fix the fraction of GDP devoted to state pensions, or the overall National Insurance contribution rate rather than allowing them to vary in line with projected spending. The generosity of pensions then has to be in line with the financing constraint.

JAPAN FACES CRITICISM OVER PENSION REFORM

G. Tett

Financial Times, Nov. 3rd 2000, p.13

Reports that the Japanese government is delaying the pension reform that introduces defined contribution schemes for the first time, to the annoyance of foreign companies.

MANDATORY DEFINED-CONTRIBUTION PENSION SYSTEMS: PROGRESS OR REGRESSION

J.A. Turner

International Social Security Review, vol.53, no.4, 2000, p.25-36

Defined-contribution pension plans have generally been considered to be free of distortionary economic effects. A closer examination has shown that, depending on their exact structure, they may be regressive, that is, they may generate better returns for high-income than low-income workers. One reason for this is that financial institutions tend to charge flat-rate fees for account management, or fees that, in relation to account balances, are higher for small accounts than for large accounts.

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