The paper shows the impact of changes in multi-pillar pension systems in six Central and Eastern European countries for individual pension wealth. It demonstrates that the post-crisis changes in pension system reduced pension wealth of workers in Poland and increased in Lithuania and Slovakia. The change did not have significant impact on pension wealth in Estonia and Romania. The magnitude of this effect is highest in those countries where the reduction of the fully-funded pension contribution was permanent. Loss or gain in pension wealth varies with age of participants – it is higher for younger people, who will accumulate their pension wealth to a larger extent after the change. The level of the change in pension wealth depends also on the wage level – higher earners lose more relative to the average wage level. The difference in pension wealth depends also on the difference between rates of return in fully funded and pay-as-you-go (PAYG) components of the pension system. The net outcome of post-crisis pension system modifications depends both on the magnitude of fully-funded contribution reduction, but also on the design of PAYG component and the way individual pension rights are accrued. These results indicate the rise in implicit liability of pension system in Slovakia to be higher than the reduction of the explicit liability caused by the pension system change and the lower rise of implicit liability in Poland and Latvia.

The aim of the paper is to investigate how child policies affect the population growth and to what extent these policies are useful to increase pension benefits of a pay-as-you-go pension system in a small open economy. Specifically, we analyze two different child policies: the provision of child allowances and an educational subsidy. We apply an overlapping generations model in its canonical form, where we consider endogenous fertility, endogenous growth and endogenous aging of the society. From the analysis, we conclude that with a child allowance, there is a consequent increase in the number of children and decrease in pension benefits and life expectancy. On the other hand, we note that with an educational subsidy, there is a decrease in the number of children, and an increase in the pension benefits and the life expectancy, respectively. The model developed aims to complement the models of the Unified Growth Theory.

We conduct two randomized control trials designed to understand the role of information and priming on the willingness to retrench the pension system. The first entails a survey to a sample of Portuguese voters, who are randomly presented with a text providing factual information about the public pension system. The second surveys a sample of Portuguese University students, randomly presented with an alternative order of questions. We show that more literacy on the pension system has a positive impact on the individual willingness to support reforms. Given that public opinion is usually seen as an important deterrent of effective action by politicians and that the level of voters’ literacy can be influenced by policy action, this analysis may provide useful insights to policy makers faced with the challenge of reforming existent pension systems. Our analysis also suggests that priming effects should not be ignored, given their impact in individuals in the extremes of the political spectrum.

Studies using data from the early 1990s suggested that while the progressive Social Security benefit formula succeeded in redistributing benefits from individuals with high earnings to individuals with low earnings, it was much less successful in redistributing benefits from households with high earnings to households with low earnings. Wives often earned much less than their husbands. As a result, much of the redistribution at the individual level was effectively from high earning husbands to their own lower earning wives. In addition, spouse and survivor benefits accrue disproportionately to women from high income households. Both factors mitigate redistribution at the household level. It has been argued that with the increase in the labor force participation and earnings of women, Social Security now should do a better job of redistributing benefits at the household level. To be sure, when we compare outcomes for a cohort with a household member age 51 to 56 in 1992 with those from a cohort born twelve years later, redistribution at the household level has increased over time. Nevertheless, as of 2004 there still is substantially less redistribution of benefits from high to low earning households than from high to low earning individuals.

This paper investigates fiscal sustainability in an overlapping generations economy with endogenous growth coming from human capital formation through educational spending. We assess how budgetary imbalances affect economic dynamics and the outlook for economic growth, thereby providing a rationale for fiscal rules ensuring sustainability. Our results show that the appropriate response of fiscal policy to temporary shocks is not trivial in the absence of fiscal rules. Fiscal rules allow for a timely reaction, thereby avoiding possibly disruptive fiscal adjustment in the future: the more adjustment is delayed, the larger its necessary scale is. We perform a rough calibration of the model to simulate the effects of a demographic shock (change in the population growth rate) under different fiscal policy scenarios.

We examine the role of self-employment in retirement transitions using a panel of administrative tax data. We find that the hazard of self-employment increases at popular retirement ages associated with Social Security eligibility, particularly for those with greater retirement wealth. Late-career transitions to self-employment are associated with a larger drop in income than similar mid-career transitions. Data from the Health and Retirement Study suggest that hours worked also fall upon switching to self-employment. These results suggest that self-employment at older ages may serve as a ‘bridge job,’ allowing workers to gradually reduce hours and earnings along the pathway to retirement.

Unlike private sector employers, public school districts generally offer more than one type of supplemental retirement savings plan and allow multiple vendors to offer products. Using individual-level payroll data from over half of the public school districts in North Carolina coupled with data from an employer survey, this study examines how inter-district differences in supplemental plan administration are related to participation in these savings vehicles. We find wide variation in total participation rates and in 403(b) plan participation rates in particular, even among this population of public-sector workers with the same defined benefit pension plan, health plan, and retiree health coverage. Individual and district characteristics explain some, but not all, of the variation observed.

Labor force participation among Mexican males in their early retirement years (60–64 years of age) has decreased in recent decades, from 94.6% in 1960 to 65.2% in 2010. Similar trends are evident elsewhere in Latin America, and have occurred in the developed world. Such trends pose challenges to the financial sustainability of social security systems as working-age populations decrease and those in retirement increase both because of demographic trends and decisions to take early retirement. In this study, we find that the Mexican social security system provides incentives to retire early. The retirement incentives of the Mexican social security system affect retirement behavior, and may be one of the main contributors to early retirement decisions, particularly for lower-income populations. We simulated the effect of the reform from a pay-as-you-go to the new Personal Retirement Accounts (PRA) system and we find that the PRA system also provides incentives for early retirement. Further analysis is needed to assess the financial sustainability of the social security system and financial security in old age for the largest cohorts in Mexico that will begin to retire by 2040.

This study documents an important role for Social Security income in workers’ retirement timing. About 40% of public school teachers are not covered by Social Security. This provides an opportunity to analyze the causal impact of Social Security on retirement timing by comparing covered and non-covered teachers. Using individual-level data from the American Community Survey, we find robust evidence of higher rates of retirement among covered teachers at Social Security eligibility ages. This pattern is confirmed using an alternative regression model of participation in the teacher labor force. These estimates suggest that, should the federal government mandate full inclusion in Social Security for all public sector workers, the retirement timing patterns of newly covered teachers and other public sector workers would likely change.

This paper provides a methodological critique of an influential method for assessing the impact on the Unfunded Accrued Liabilities (UAL) of the gap between assumed and actual investment returns over extended periods, and offers a sound replacement. The method in question simply sums over time the components of the annual actuarial gain/loss report. This implicitly assumes that in the counterfactual exercise, the interest on the additional UAL is covered dollar-for-dollar by amortization. But under actual funding formulas amortization usually varies less than interest. This means there are large intertemporal interactions between the gap in investment returns and subsequent shortfalls between contributions and interest. Using the actual funding formula in the counterfactual can lead to much higher estimates of the UAL impact of the gap in investment returns because it does not assume away these interactions. This method can more accurately inform policy-makers, regarding the importance of cutting the assumed rate of return.

The main aim of this paper is to analyse the impact of shifting demographics and changes in pension arrangements in a model that includes housing as both an investment asset and a consumption good. We consider the impact on welfare, and on macroeconomic aggregates, of some specific pension reforms. Using a calibrated OLG model with several sources of uncertainty, we find that the impact of ageing and of reform of social security upon the demand for housing and the level of owner occupation is substantial. We find that pension reform has a very significant impact on the demand for, and price of, housing. The interaction between pension reform and housing is a neglected subject and one which the results we present suggest is important.

Fiscal stress pressures state legislators to either raise taxes or cut spending, but public pensions provide a vehicle to postpone tax increases and maintain current spending. I estimate that states cut their pension contributions at seven times the rate of other spending in response to fiscal stress. The cumulative impact of state undercontributions due to fiscal stress explains about 4% of mid-2008 actuarial underfunding. States not paying actuarially required contributions for reasons other than fiscal stress explains an additional quarter of underfunding. As investment returns explain little underfunding, much underfunding appears due to insufficient employee and actuarially required government contributions to keep up with growing pension liabilities.

Based on nationally representative data (N = 8,901), this study investigates the extent to which expectations for intra-family transfers and government assistance in old age impact the probability of saving for retirement among working-age individuals in Thailand. Results show that expectations for financial non-self-reliance and expectations that family support would constitute the most important source of old-age financial security reduce the probability that working-age individuals would save for retirement. Expectations for government support have no impact on average. Given that filial piety is weakening in Thailand, this study suggests that the government encourage pre-retirement savings more strongly.

Empirical analyses of annuities markets have been limited to a few developed countries and restricted by data limitations. Chile provides excellent conditions for research on annuities due to the depth of its market and the availability of data. The paper utilizes a panel of life insurance company data to examine econometrically the main determinants of the annuity rate, defined as the internal rate of return on annuities. The results indicate that the annuity rate is determined by the risk-free interest rate, the share of privately issued higher yield securities in the portfolio of providers, as a proxy for the spread over the risk-free rate, the leverage of providers, the level of broker's commissions, the market share of individual providers, the level of the premium, and the degree of market competition. The results also show that efforts to improve market transparency produced structural shifts in the parameters of the annuity rate equation. The results are consistent with separate research on money's worth ratios, and indicate the need to develop appropriate financial instruments, allowing providers to hedge their risks while extracting higher returns, and also to ensure competition and transparency in annuities markets, in order to ensure good outcomes for annuitants.

This paper investigates the effects of the Affordable Care Act (ACA) on retirement. The first part of the paper is a difference-in-difference analysis of changes in retirement (and retirement expectations) before and after adoption of the ACA. We find no statistically significant evidence that ACA increased the propensity to retire or changed retirement expectations. The second part of the analysis is based on a structural retirement model. For those age 50 at the time ACA was introduced, the overall reduction in full-time work over the age span 54–65 is simulated to be about 0.1 percentage points. Data are from the Health and Retirement Study.

Targeting is an important aim of social policy. Three case studies in this paper reflect typical short-comings in the targeting design of pension reforms. The first case study examines how well work disability and receipt of disability insurance match in Germany. We show that the 2001 reform has not systematically improved target quality. The second case study examines whether the 2014 introduction of a new pathway of early retirement without actuarial adjustments has reached individuals who are less healthy because they have worked a long time in an arduous job. We find that the target population is actually healthier than the comparison group. Third, a much discussed supplemental pension benefit for households in the risk of poverty will miss its target population in both relevant directions: Regarding the first, 23% of those pensioners who are not eligible are nevertheless poor in the sense of the new law. Regarding the other direction, 21% of the eligible pensioners belong to the wealthier half of German pensioners. Since similar reforms are currently debated in many European countries, the three German case studies may serve as examples of how to better target public pension policies.

The revealed preference for dominated insurance-based personal pension plans (PPPs) in Italy is a decade-long puzzle. I surmise that a motivation from the supply side is a sales force factor deriving from the geographical distribution of financial providers, including the countrywide network of the state controlled Post Office. I provide supporting evidence using three biennial waves of the Bank of Italy's survey on household finances from 2010 to 2014. The time interval includes a public pension system reform sharply raising the statutory age retirement, legislated in December 2011 to defuse a sovereign debt crisis. I show that the salience effect on the awareness of the benefits of supplementing lower perspective public pensions with PPPs increased the explanatory power of financial strength indicators. Exploiting a module in the 2010 wave I estimate a surprising decrease in the probability of subscription to PPPs in 2014 associated with the indicator for the highest financial literacy level.

Do the retirement patterns of public-sector workers differ from those in the private sector? The latter typically face a retirement landscape with exposure to market uncertainties through defined-contribution pension plans and private saving. Public-sector workers, in contrast, are often covered by defined-benefit pension plans that encourage retirement at relatively young ages and offer financial security at older ages. We examine how private- and public-sector workers transition from full-time career employment, with a focus on the importance of gradual retirement. To our surprise, we find that the prevalence of continued work after career employment, predominantly on bridge jobs with new employers, is very similar in the two sectors, a result with important implications in a rapidly aging society.

In this paper, we assess the welfare costs and gains of different scenarios of pension reforms in France, using a life-cycle model including various sources of heterogeneity and distinguishing between socio-occupational groups. The pension reforms considered combine features regarding the generosity of the pension system as well as features regarding the financing schemes: PAYG, the build-up of a temporary fund and that of a permanent one. We focus on both macro and distributional issues. It appears that (i) a considerable increase in savings is to be expected, even in the case where pensions remain generous, (ii) a considerable crowding-out effect would occur in the case of the constitution of a fund trust, (iii) reducing the generosity of pension seems relatively more beneficial to low-income low-life expectancy agents, while (iv) postponing the legal retirement age benefits relatively more high-income high-life expectancy agents.

The purposes of this paper are to consider the effect on remuneration of defined benefit pension accrual and the factors that have resulted in changes to the cost and value of this accrual. In this paper, I look at the effect of the change in the cost to an employer of providing a defined benefit pension on the overall cost of remunerating an employee and compare that with the cost of remunerating an employee with no such pension benefits. I allow for the additional cost to the employer of national insurance contributions (‘NICs’). I also look at the change in value of an employee's remuneration, taking into account the value of defined benefit pension accrual and compare this with the change in remuneration for an employee with no such benefits. Here, I allow for employee national insurance contributions and income tax. These assessments look at the cost and value of pension accrual rather than any surplus or deficit relating to previously accrued pension entitlements. I find that costs of employment have risen significantly more for members of defined benefit pension schemes compared with other employees, and that this has largely been as a result of falling long-term interest rates and their effect on the cost of defined benefit pension accrual. The increase in the value of remuneration to employees has shown a similar pattern.