Positioning pensions for the twenty-first century

2001

The past twenty years witnessed a rather striking transformation in the world's pension environment. Population aging and workforce changes in virtually all developed countries have sparked new forms of retirement provision. This pressure, combined with global Wnancial market integration, has altered how people think about, and save for, retirement. As a case in point, many countries in the Western Hemisphere have moved away from a deWned beneWt (DB) pension model toward deWned contribution (DC) plans, where participants' assets are accumulated and invested in capital markets. This has been a strong trend in Latin America, and similar changes have emerged in the United Kingdom, Germany, and most recently, Japan. The U.S. pension environment has changed as well, with workers increasingly interested in retirement accumulation accounts and moving into deWned contribution pensions in response to the robust stock market performance at the end of the twentieth century. In the United States, as elsewhere, rising life expectancies and longer periods of labor market attachment have also enhanced the appeal of pensions for groups that previously lacked coverage years ago, such as among women. 1 Employers here, as elsewhere, are increasingly willing and even eager to provide new forms of pensions, responding to changes in the industrial and occupational mix of employment, and to an interest in using pensions to induce particular worker behaviors. 2 The pension arena has also been shaped by U.S. regulatory developments including legislation liberalizing tax treatment of pension funding levels, contribution amounts, and beneWt payouts (McGill et al. 1996). In sum, the last two decades have been favorable to a dynamic pension environment in the United States, just as in the rest of the world. Nevertheless, the historical legacy in the U.S. pension arena has been the deWned beneWt model, and as such, this plan type remains important to millions of workers and their employers. Nevertheless, companies that provided DB plans did not stand still: these sponsors too altered many aspects

The Modern Law Review, 1986

Bcttcr Pcnsions. Cmnd. 5713. p.XS4. Currcntly 6.25 pcr ccnt. Thc Social Sccurity (Class 1 Contributions-Contractcd-out Pcrccntagcs) Ordcr 19x2. S.I. 19x21493. '' Supra note 69. 74 Occupational Pension Board. "Greater security for the rights and expectations of members bf occupational pension schemes." Cmnd. bh49 (HMS6,. 1982), pa& 11.4.

2014

In 1963, the termination of the Studebaker Corporation’s pension plan wiped out or significantly reduced the pensions of thousands of the automaker’s employees and retirees. In response, Congress passed the 1974 Employee Retirement Income Security Act (ERISA), a monumental and revolutionary piece of legislation crafted to address corporate pension underfunding and set new rules regarding defined benefit (DB) and other retirement plans. ERISA also established the Pension Benefit Guaranty Corporation as a government-run insurer to serve as a backdrop to U.S. corporate pensions. Despite the bill’s far-ranging scope, in the years since its passage it has become evident that ERISA failed to achieve all of its intended objectives. The corporate pension scene today is in turmoil, and most private employers have terminated or frozen their traditional DB plans. In their place, employers are increasingly substituting defined contribution (DC) retirement saving plans, which pose a new set of r...

1992

In this paper, we outline recent trends in employer pension pIan structure in the United States, focusing on plan coverage, plan type and pension plan design. We then identify the key factors that we believe will shape company-sponsored pension design in the future, drawing conclusions from a review of recent research and practice. Finally, we offer a cautious prognosis about the future of pension pIan coverage, pIan type and pIan design, focusing on the role of labor force aging, as well as anticipated developments in the business environment and anticipated changes in public policy.

RePEc: Research Papers in Economics, 1983

Old age income security is one of society's most pressing concerns. A decline in family support of the aged, major increases in the length of retirement, and social security's long-term financial difficulty are all reasons for the growing anxiety. Consideration of current and past socioeconomic data provides a solid basis for this anxiety. Between 1950 and 1970 the fraction of the aged living with their children declined from 31 to 9 percent.' Today fewer than 3 percent of elderly households receive income from their children.z These contributions represent less than 1 percent of the income of the e l d e r l ~. ~ Life expectancy for males at age 25 is 46.9 additional years, up from 44.6 years in 1 950.4 Despite this increase, the average number of years worked by 25-year-old males has declined by 3.13 years.5 Together, these changes have almost doubled the expected duration of retirement and other nonworking periods for males from 5.93 years to 11.47 years. The ratio of nonworking to working years for males is now .32, more than twice the 1950 value. For females, growth in the expected work span, associated with dramatic postwar increases in labor force participation, has exceeded growth in the expected life span by 3.26 years. However, if one measures female work years on a male-equivalent earnings basis, the average young adult's expected nonworking period has increased by 3.60 years.6According to this measure, 25-year-olds can now expect to spend 1.2 years out of the work force for every year they spend in the work force.' Difficulties in financing an extended retirement without major family support have been eased considerably by sizable increases in real social security benefits. These benefits now represent the major source of income for 54 percent of the aged.8 However, the continued reliance on social security benefits as the primary source of old age income support is becoming increasingly unlikely. Demographic changes continue to place the Social Security System in a long-term financial crisis. Changes in fertility rates are expected to lower the ratio of social security contributors to beneficiaries from the current value of 3.2 to 1.5 by the year 2040.9The 1983 social security legislation notwithstanding, unless additional measures are enacted shortly, social security tax rates, including health insurance tax rates, could rise as high as 25 percent by the early part of the next century to meet projected benefit payments.lo The rapid growth of private, state, and local pensions in the 1950% 1960s, and 1970s represents a natural response to changes in family support of the elderly, an expansion of the retirement period, and uncertainty concerning the amount of retirement income one can expect from social security. Special tax incentives, a recognition of the advantages of group insurance policies, and the use of fringe benefits to avoid periodic government wage controls are important additional explanations of pension growth. The American pension system is, however, more than simply the inevitable product of changing social, demographic, and economic conditions. Pensions themselves are playing an increasingly important role in shaping social conditions and altering economic behavior. Pensions and the Economics of Aging 1 1.3 The Emerging Role of Pensions in the American Economy: Postwar Patterns of Growth Private, state, and local pensions now cover over 45.28 percent of the U.S. labor force. In 1950 the figure was 19.93 percent. Coverage of private wage and salary workers more

Fmg Discussion Papers, 2006

Many countries face increasing fiscal problems financing pensions in the face of population aging. There is controversy about the underlying economic theory, about the extent of the problem, and about the best mix of policies to protect old-age security. This paper establishes the areas of debate; gives thumbnail descriptions of pension arrangements in different countries; discusses the main analytical and empirical issues relevant to thinking about pension design; and assesses a range of policy directions. The main conclusions are that what matters most is effective government and economic growth; that the debate between pay-as-you-go and funding is secondary; that good pension schemes can take many forms; and that there is a problem in financing pensions, but not a crisis.

This volume begins with a series of four papers on retirement saving of individuals and the saving which results from corporate funding of their pension plans. The first paper discusses individual retirement accounts (IRAs). The second considers reasons why more individual retirement saving is not used to purchase annuities. The third examines the reasons for recent reductions in saving through private pension plans. The fourth deals with poverty among retirees, whose saving preparation for retirement may have been inadequate. Following are two papers that address particular aspects of pension plans themselves: The first considers the relative merits of defined benefit versus defined contribution plans from the perspective of the employee wishing to avoid retirement income uncertainty. The second is an empirical investigation of the relationship between pension plan provisions and job turnover.

2015

The last twenty years witnessed a rather striking transformation in the world’s pension environment. Population aging and workforce changes in virtually all developed countries have sparked new forms of retirement provision. This pressure, combined with global financial market integration, has altered how people think about, and save for, retirement. As a case in point, many countries in the Western Hemisphere have moved away from a defined benefit (DB) pension model toward defined contribution (DC) plans, where participants ’ assets are accumulated and invested in capital markets. This has been a strong trend in Latin America, and

1988

This volume begins with a series of four papers on retirement saving of individuals and the saving which results from corporate funding of their pension plans. The first paper discusses individual retirement accounts (IRAs). The second considers reasons why more individual retirement saving is not used to purchase annuities. The third examines the reasons for recent reductions in saving through private pension plans. The fourth deals with poverty among retirees, whose saving preparation for retirement may have been inadequate. Following are two papers that address particular aspects of pension plans themselves: The first considers the relative merits of defined benefit versus defined contribution plans from the perspective of the employee wishing to avoid retirement income uncertainty. The second is an empirical investigation of the relationship between pension plan provisions and job turnover.