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Welfare Reform on the Web (March 2005): Pensions - Overseas

ADOPTING CASH BALANCE PENSION PLANS: IMPLICATIONS AND ISSUES

R.L. Clark and S.J. Schieber

Journal of Pension Economics and Finance, vol.3, 2004, p.271-295

Presents a broad overview of the evolution of hybrid pension plans in the USA. There are two main types of hybrid plans: pension equity plans and cash balance plans. Provides an overview of the design features of these plans and the motivation of employers in switching to them. The move towards hybrid plans appears to be cost neutral for employers. However, there are distributional effects: in general, younger workers tend to receive higher benefit accruals under the hybrid plans, whereas many older workers are worse off, particularly those intending to take early retirement.

BUSH GOES ON ROAD TO PERSUADE PUBLIC TO PUSH FOR PENSIONS REFORM

J. Chung

Financial Times, Feb. 4th 2005, p.8

US President George Bush is seeking to encourage the public to put pressure on members of Congress to advance pension reform. With the Social Security system heading for bankruptcy, Bush is advocating the introduction of private savings accounts and preparing people for eventual benefit cuts.

(See also Daily Telegraph, Feb. 4th 2005, p.14)

EARLY RETIREMENT ACCOUNTS ARE THE WAY FORWARD

T. Halstead and P. Longman

Financial Times, Feb. 7th 2005, p.17

Presents a proposal for the reform of the US public pension system that would allow workers to divert a portion of their payroll taxes into personal pension funds. These could generate enough income to fund early retirement. In exchange, the age at which the state pension would be payable would rise, but without any cuts in benefits thereafter.

POTENTIAL IMPLICATIONS OF MANDATING CHOICE IN CORPORATE DEFINED BENEFIT PLANS

O.S. Mitchell and J. Mulvey

Journal of Pension Economics and Finance, vol.3, 2004, p.339-354

Conversions to hybrid pension plans have prompted a number of high profile legal challenges in the USA. In response, policymakers have attempted to force companies switching to a hybrid plan from a traditional defined benefit (DB) plan to offer all workers the choice of remaining with the old DB plan. Paper estimates the cost to employers of such a requirement. Finds that mandating choice could increase employers' costs above the current costs of traditional defined benefit plans. In the end, rising costs could endanger occupational pension schemes.

PROMOTING WORK AT OLDER AGES: THE ROLE OF HYBRID PENSION PLANS IN AN AGING POPULATION

R.W. Johnson and E. Steuerle

Journal of Pension Economics and Finance, vol.3, 2004, p.315-337

As the population ages and younger workers become relatively scarce, employers in the USA are looking for ways to encourage older adults to remain in the workforce. Paper shows how hybrid pension plans, such as cash balance plans and pension equity plans, among other private and public retirement plan reforms, can be used to offer incentives to older adults to remain in work.

THE REALITY AND CHALLENGES OF PENSION SCHEMES IN TUNISIA

C. Houssi

International Social Security Review, vol.58, Jan.-Mar. 2005, p.99-120

The population of Tunisia is ageing. A simulation of the impact of population ageing on the existing pay-as-you-go and defined benefit pension schemes shows that deficits can be expected to grow exponentially, jeopardising the financial viability of the schemes. After exploring the experiences of a number of other countries facing the same problem, author proposes a switch to notional defined contribution schemes.

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