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Welfare Reform on the Web (March 2004): Pensions - Overseas

ASSESSING THE PENSION REFORM POTENTIAL OF A NOTIONAL DEFINED CONTRIBUTION PILLAR

J.B. Williamson

International Social Security Review, vol.57, Jan.-Mar.2004, p.47-64

The notional defined contribution model, also financed on a pay-as-you-go basis, is coming to the fore as an alternative to traditional pay-as-you-go defined benefit public pension systems. Drawing on evidence from schemes in six countries, article aims to describe the notional defined contribution model and to review its strengths and weaknesses relative to the major alternatives, the pay-as-you-go defined benefit model and the funded defined contribution model.

AUSTRALIA TO ENCOURAGE OVER 65S TO KEEP WORKING

V. Marsh

Financial Times, February 26th 2004, p.11

Australian government is proposing changes to the compulsory superannuation scheme to encourage citizens to work beyond the traditional age of retirement.

INDIVIDUAL ACCOUNTS: LESSONS FROM SWEDEN

J. Turner

International Social Security Review, vol.57, Jan.-Mar.2004, p.65-84

Sweden has initiated a mandatory funded individual account system of pension provision that differs in important ways from earlier such systems. It incorporates lessons learned from Chile and other countries, particularly about ways to reduce the administrative costs of an individual account system.

ITALIAN PENSION REFORM PROGRAMME REVISED IN EFFORT TO EASE UNION HOSTILITY

R. Barber

Financial Times, February 20th 2004, p.6

Under the new proposals, Italian men could only retire on a full pension after 35 years of contributions if they were 60 years old or over. The reform would be launched in 2008. Article goes on to discuss trade union and political party opposition to the reform.

PENSION FUNDS AND VALUE-BASED GENERATIONAL ACCOUNTING

E.H.M. Ponds

Journal of Pension Economics and Finance, vol.2, 2003, p.295-325

The paper focuses on conflicts between different stakeholders in a pension scheme, including the sponsor and different classes of members. When pension funds choose investment strategies that do not match liabilities, the mismatch risk is borne by the sponsor as well as future generations of members. The author presents a general framework for assessing intergenerational transfers in pension funds, and therefore provides a tool to assess how the effects of different pension policy changes are distributed. The specific transfers that occur in practice depend not just on scheme design but also on legal rules, which protect members and divide up surpluses between different stakeholders. The framework is applied to the Netherlands as a case study.

PENSION REFORM IN THE BALTIC STATES: CONVERGENCE WITH "EUROPE" OR WITH "THE WORLD"

B.H. Casey

International Social Security Review, vol.57, Jan.-Mar.2004, p.19-45

Article examines pension reform in Estonia, Latvia and Lithuania over the past decade in the light of the "European social model" and the "World Bank model". The former emphasizes income adequacy and solidarity while the latter stresses fiscal sustainability and savings. Initial reforms in the Baltic States established pension schemes based on earnings and length of service which were similar to those in many European states. Subsequent reforms attempted to shift from a publicly financed pay-as-you-go system to one based on "funding" and individual accounts. Such systems have been promoted by the World Bank.

THE PRIVATIZATION OF RETIREMENT INCOME? VARIATION AND TRENDS IN THE INCOME PACKAGES OF OLD AGE PENSIONERS

A.W. Pedersen

Journal of European Social Policy, Vol. 14, 2004, p.5-23

The article examines the extent to which pensioners in nine OECD countries supplement their state income with private means. It questions whether there is a trend towards stronger reliance on private provision and, thus, whether pensioners in different countries have the same relative income, despite the variation in the generosity of national pension schemes.

PROTECTING UNDERFUNDED PENSIONS: THE ROLE OF GUARANTEE FUNDS

R.W. Cooper and T.W. Ross

Journal of Pension Economics and Finance, vol.2, 2003, p.247-272

Paper examines the role and design of guarantee funds for private pensions. Many private defined benefit pensions are significantly underfunded at present and there is concern about how to provide appropriate benefit security for members. Article starts with a model with capital market imperfections, which provides an explanation of why firms underfund pensions. Then shows that in this environment it can be impossible for private guarantee funds to function, and hence there is room for state intervention in the market. However the structure of state guarantee funds is important. Article shows that some types of guarantee funds can encourage underfunding and equity investment, with potential adverse effects on the welfare of participants.

RETHINKING THE WELFARE STATE: THE POLITICAL ECONOMY OF PENSION REFORM

M. Rein and W. Schmahl

Cheltenham: Edward Elgar, 2004

This book discusses the changing political economy of pension reform. It focuses on those countries which have launched a significant reframing of their pension systems. Each chapter provides a detailed review of recent pension reforms and offers evidence of the extent to which those reforms suggest a redirection of the welfare state towards a more public-private mix of provision. The countries selected represent the variety of new directions which countries have taken. One conclusion is that the design of the pension scheme may be more important than the mix of public-private in preventing the growth of inequality among the aged.

SOCIAL SECURITY PRIVATIZATION AND OLDER WOMEN: A FEMINIST POLITICAL ECONOMY PERSPECTIVE

C.L. Estes

Journal of Ageing Studies, vol.18, 2004, p.9-26

The proposed privatisation of the US state pension scheme is examined in terms of its gender-based ideological underpinnings and assumptions about the nature of work, productivity, individualism, interdependence and exchange. Negative effects are particularly harsh for older women who do not conform to the model of family status as married with a male breadwinner, and for those already disadvantaged by race, ethnicity and class.

US SOCIAL SECURITY COSTS ARE "UNAFFORDABLE", CLAIMS FEDERAL RESERVE CHAIRMAN

R. Cornwell

The Independent, February 26th 2004, p.23

The Federal Reserve Bank chairman Alan Greenspan has called for early cuts in US state pensions to prevent costs spiralling out of control when some 70 million baby-boomers retire in around 2010. The changes could be achieved by trimming annual cost-of-living rises, or by raising the retirement age from 65 to 67 or more

(See also The Guardian, February 26th 2004, p.19)

WHICH INDIVIDUALS MAKE ACTIVE INVESTMENT DECISIONS IN THE NEW SWEDISH PENSION SYSTEM?

S. Engstrom and A. Westerberg

Journal of Pension Economics and Finance, vol.2, 2003, p.225-245

In Sweden, the state pension system has recently been reformed and the new defined contribution system is based on individual accounts. It allows Sweden's workforce of 4.4m individuals to invest part of their individual pension account in mutual funds. Finds that individuals tend to make their own investment decisions, and that women and younger people are more likely than older people to be active in decision-making.

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