April 2020
08Apr

Regime-Switching in the Volatility of Mexican Pension Fund Returns

By Francisco López-Herrera, Marissa R. Martínez-Preece, Roberto Joaquín Santillán-Salgado Several Latin American countries reformed their retirement-pension systems during the 1980s and 1990s because the previous funded or pay-as-you-go systems were deemed insufficient to support the rapidly growing aging populations. Mexico was no exception, and in 1997 it replaced its traditional pay-as-you-go system with a privately managed scheme, in which contributions by or on behalf of active workers are deposited in individual accounts and channeled to a privately managed pension...

April 8, 2020
Articles, Investment
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08Apr

Covid-19: Restrictions, Economic Losses And Incentives. European And Global Overview

By Virginia CÂMPEANU The viral epidemic COVID-19 started in December 2019 in a large city of China, Wuhan with a population of about 20 million, similar to that of Romania. The huge speed of virus spread inside China, then outside the borders has determined the World Health Organization (WHO) to declare on January 30, 2020, "Global emergency for public health" (pandemic). In mid-March, the epicentre of the epidemic moved from Asia to Europe, where the number of cases continues...

April 8, 2020
Articles, System Sustainability, , , ,
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03Apr

Pension Policy in Europe and the United States – Towards a New Public-Private Pension Mix

By Onorato Castellino, Elsa Fornero, Christina Benita Wilke Pension reform has occupied and will continue to occupy an important place in the welfare state reform agenda on both sides of the Atlantic. In both the European Union (EU) and the United States (US) demographic forces in the form of an aging population and low fertility pose significant long-run fiscal challenges to traditional public pay-as-you-go (PAYG) systems. In addition, the pace of pension reforms in most EU countries has accelerated...

April 3, 2020
Articles, Pension design, , ,
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03Apr

The Political (In)Stability of Funded Pension Systems

By Roel M. W. J. Beetsma, Oliwia Komada, Krzysztof Makarski, Joanna Tyrowicz We analyze the political stability of capital funded social security. In particular, using a stylized theoretical framework we study the mechanisms behind governments capturing pension assets in order to lower current taxes. This is followed by an analysis of the analogous mechanisms in a fully-edged overlapping generations model with intra-cohort heterogeneity. Funding is efficient in a Kaldor-Hicks sense. Individuals vote on capturing the accumulated pension assets and...

April 3, 2020
Articles, System Sustainability, ,
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03Apr

How People React to Pension Risk

By Nicolas Salamanca, Andries de Grip, Olaf Sleijpen We show that people exposed to greater pension risk are less likely to invest in risky assets. We exploit a reform that links people's future pension benefits to their pension funds' funding ratio—a measure of the fund's financial health—making funding ratios a fund-specific measure of pension risk. The effect of pension risk is stronger for people who are better informed about their pensions, for retirees and pension-age non-retirees, and for wealthier...

April 3, 2020
Articles, Savings, ,
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March 2020

28Mar

The Economics of Ageing—What Do You Face?

By Ian M. McDonald The economics of ageing is the study of economic decision‐making by individuals and government aimed at fostering well‐being in old age. These decisions include preparing for old age and dealing with the risks of old age. The risks are substantial. Using the life‐cycle model, this article considers the risks for well‐being that people face in retirement and the role of government and private insurance in meeting those risks. The perspective of the life‐cycle model is...

March 28, 2020
Aging, Articles, , ,
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28Mar

Who Takes Advantage of Tax-Deferred Savings Programs? Evidence From Federal Income Tax Data

By David P. Richardson, David Joulfaian This paper provides insight into the attributes of wage-earning households that participate in tax-deferred retirement savings plans. Examining data from federal tax returns, we find that approximately 52 percent of individuals and 55 percent of households participated in a retirement savings program in 1996. Excluding households with wages within the 1996 poverty thresholds and individuals under age 21 or over age 70, the age-wage restricted participation rates were 66 percent and 79 percent...

March 28, 2020
Articles, System Sustainability, ,
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28Mar

Opting Out of Social Security: An Idea That’s Already Arrived

By David P. Richardson Under current law, workers can partially opt out of Social Security and reduce Medicare tax liability by accepting compensation in forms exempt from payroll taxes. Changing forms of compensation has an ambiguous effect on a worker's lifetime consumption possibilities. With respect to Medicare, all households are better off since they reduce tax contributions to a fixed benefit. For Social Security, the effect is ambiguous since the tax reduction implies future benefit reductions. Analyzing a hybrid...

March 28, 2020
Articles, Labor Market, ,
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20Mar

Insurance against Long-Run Volatility Risk: Demand, Supply, and Pricing

By Chuck Fang Despite its importance implied in asset pricing and macroeconomic models, insurance against long-run volatility risk has received little empirical documentation regarding its demand, supply, or pricing. This paper bridges the gap. First, I show that households have directly purchased large quantities of insurance against long- run volatility risk through the minimum return guarantees available in variable annuities, a form of retail retirement and savings product offered by life insurance companies. Total net assets with such insurance...

March 20, 2020
Articles, Investment, Pension Management
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20Mar

Grouping Individual Investment Preferences in Retirement Savings: A Cluster Analysis of a USS Members Risk Attitude Survey

By David P. Blake, Mel Duffield, Ian Tonks, Alistair Haig, Dean Blower, Laura MacPhee Cluster analysis is used to identify homogeneous groups of members of USS in terms of risk attitudes. There are two distinct clusters of members in their 40s and 50s. One had previously ‘engaged’ with USS by making additional voluntary contributions. It typically had higher pay, longer tenure, less interest in ethical investing, lower risk capacity, a higher percentage of males, and a higher percentage of...

March 20, 2020
Articles, Savings, , ,
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