A. “Pensions Bill 2013-14,” by Djuna Thurley (SN06634, May 2013, .pdf format, 12p.).
B. “State pension: 25 pence age addition,” by Djuna Thurley (SN00321, May 2013, .pdf format, 6p.).
A. “Pensions Bill 2013-14,” by Djuna Thurley (SN06634, May 2013, .pdf format, 12p.).
B. “State pension: 25 pence age addition,” by Djuna Thurley (SN00321, May 2013, .pdf format, 6p.).
“Policyholder Protection Schemes: Selected Considerations,” by (OECD Working Papers on Insurance and Private Pensions No. 31, May 2013, .pdf format, 64p.). Note: Links to the abstract and full-text can be found at:
“Is OPM Processing Federal Worker Pension Claims on Time?” a hearing held May 9, 2013 (witness statements available in .pdf format, full hearing can be viewed in Flash format, running time 1 hour 7 minutes).
“Single-Employer DB Plan Freezes,” (May 2013, .pdf format, 11p.).
“Adding Actuarial Information on Defined Benefit Pensions to the US National Accounts,” by Marshall Reinsdorf (April 2013, .pdf format, 24p.).
“The design and implementation of public pension systems in developing countries: Issues and options,” by David E. Bloom and Roddy McKinnon (PGDA Working Paper No. 102, May 2013, .pdf format, 24p.).
Developing countries are increasingly aware of the need to design and implement improvements in public systems for providing pensions to the elderly. Such systems may aim to smooth consumption and thus provide reliable income to older people, reduce poverty among the elderly, insure those no longer working against the risk of running out of funds, and promote equal treatment of men and women in retirement security even when lifetime earnings and projected average life expectancy may differ greatly. The increasing share of the elderly in the population of all countries makes implementation of sustainable pension systems both more urgent and more difficult. Planners must consider numerous options in pension system design and choose the combination of policies that will optimize coverage, benefits, and financing given a country’s demographics, history, practices regarding family support of the elderly, political system, extent of informal labour, and fiscal situation.
“Single-tier State Pension – women born between 1951 and 1953,” by Djuna Thurley (SN06620, April 2013, .pdf format, 8p.).
“Is there an optimal pension fund size? A scale-economy analysis of administrative and investment costs,” by Jacob Bikker (Working Paper 376, April 2013, .pdf format, 35p.). Note: Links to the abstract and full-text can be found at:
“Age-related personal allowance,” by Antony Seely and Dominic Webb (SN06158, April 2013, .pdf format, 21p.).
Pension Trends has added two new chapters: Chapter 9: Pension scheme funding and investment and Chapter 10: Saving for retirement (2013 Edition, April 2013, .pdf and HTML format).
A. “Financial Literacy and High-Cost Borrowing in the United States,” by Annamaria Lusardi and Carlo de Bassa Scheresberg (w18969, .pdf format, 41p.).
In this paper, we examine high-cost methods of borrowing in the United States, such as payday loans, pawn shops, auto title loans, refund anticipation loans, and rent-to-own shops, and offer a portrait of borrowers who use these methods. Considering a representative sample of more than 26,000 respondents, we find that about one in four Americans has used one of these methods in the past five years. Moreover, many young adults engage in high-cost borrowing: 34 percent of young respondents (aged 18–34) and 43 percent of young respondents with a high school degree have used one of these methods. Using well-tested questions to measure financial literacy, we document that most high-cost borrowers display very low levels of financial literacy, i.e., they lack numeracy and do not possess knowledge of basic financial concepts. Most importantly, we find that those who are more financially literate are much less likely to have engaged in high-cost borrowing. Our empirical work shows that it is not only the shocks inflicted by the financial crisis or the structure of the financial system but that the level of financial literacy also plays a role in explaining why so many individuals have made use of high-cost borrowing methods.
B. “Shrouded Costs of Government: The Political Economy of State and Local Public Pensions,” by Edward L. Glaeser and Giacomo A. M. Ponzetto (w18976, April 2013, .pdf format, 67p.).
Why are public-sector workers so heavily compensated with pensions and other non-pecuniary benefits? In this paper, we present a political economy model of shrouded compensation in which politicians compete for taxpayers’ and public employees’ votes by promising compensation packages, but some voters cannot evaluate every aspect of compensation. If pension packages are “shrouded,” meaning that public-sector workers better understand their value than ordinary taxpayers, then compensation will be inefficiently back-loaded. In equilibrium, the welfare of public-sector workers could be improved, holding total public sector costs constant, if they received higher wages and lower pensions. Central control over dispersed municipal pensions has two offsetting effects on pension generosity: more state-level media attention helps taxpayers better understand pension costs, which reduces pension generosity; but a larger share of public sector workers will live within the jurisdiction, which increases pension generosity. We discuss pension arrangements in two decentralized states (California and Pennsylvania) and two centralized states (Massachusetts and Ohio) and find that in these cases, centralization appears to have modestly reduced pension arrangements; but, as the model suggests, this finding is unlikely to be universal.
“Review of the Irish Pension System,” (April 2013, .pdf format, 157p.).
“Australia’s Retirement System: Strengths, Weaknesses, and Reforms,” by Julie Agnew (IB 13-5, April 2013, .pdf format, 10p.).
“Do Public Pension Obligations Affect State Funding Costs?” by Jean Burson, John B Carlson, Ozgur Emre Ergungor and Patricia Waiwood (WP 13-01, February 2013, .pdf format, 28p.). Note:
States’ unfunded pension obligations to their current and retired employees have exploded in recent years to levels that are estimated to be between $750 billion and $4.4 trillion. In theory, this massive debt should have implications for states’ ability to meet their financial obligations and a measurable impact on funding costs. Yet, we find no evidence that municipal bond markets are pricing the risks to states’ fiscal health arising from these large obligations.
“Private Pensions: Timely Action Needed to Address Impending Multiemployer Plan Insolvencies,” (GAO-13-240, March 2013, .pdf format, 66p.).
A. “The Single-tier State Pension: Part 1 of the draft Pensions Bill: Vol. 1,” (April 2013, HTML and .pdf format, 162p.).
B. “The Single-tier State Pension: Part 1 of the draft Pensions Bill: Vol. 2,” (April 2013, HTML and .pdf format, 65p.).
A. “Rasagiline Ameliorates Olfactory Deficits in an Alpha-Synuclein Mouse Model of Parkinson’s Disease,” by Geraldine H. Petit, Elijahu Berkovich, Mark Hickery, Pekka Kallunki, Karina Fog, Cheryl Fitzer-Attas, and Patrik Brundin (PLoS ONE 8(4): e60691. doi:10.1371/journal.pone.0060691, XML, HTML, and .pdf format, 13p.).
B. “Genetic Loci Associated with Alzheimer’s Disease and Cerebrospinal Fluid Biomarkers in a Finnish Case-Control Cohort,” by Lyzel S. Elias-Sonnenschein, Seppo Helisalmi, Teemu Natunen, Anette Hall, Teemu Paajanen, Sanna-Kaisa Herukka, Marjo Laitinen, Anne M. Remes, Anne M. Koivisto, Kari M. Mattila, Terho Lehtimaki, Frans R. J. Verhey, Pieter Jelle Visser, Hilkka Soininen, and Mikko Hiltunen (PLoS ONE 8(4): e59676. doi:10.1371/journal.pone.0059676, XML, HTML, and .pdf format, 9p.).
C. “Patients with Severe Radiographic Osteoarthritis Have a Better Prognosis in Physical Functioning after Hip and Knee Replacement: A Cohort-Study,” by J. Christiaan Keurentjes, Marta Fiocco, Cynthia So-Osman, Ron Onstenk, Ankie W. M. M. Koopman-Van Gemert, Ruud G. Poll, Herman M. Kroon, Thea P. M. Vliet Vlieland, and Rob G. Nelissen (PLoS ONE 8(4): e59500. doi:10.1371/journal.pone.0059500, XML, HTML, and .pdf format, 8p.).
“Super for Some,” by Richard Denniss (Policy Brief No. 50, March 2013, .pdf format, 6p.).
“Quarterly Survey of Public Pensions: State & Local Government – 2012 Fourth Quarter,” (Microsoft Excel and .pdf format).
“Reform of ill-health retirement of police in England and Wales: impact on pension liabilities and the role of local finance,” by Rowena Crawford and Richard Disney (W13/06, March 2013, .pdf format, 29p.). Note: Links to the abstract and full-text can be found at:
“How best to measure pension adequacy,” by Aaron George Grech (CASE/172, March 2013, .pdf format, 35p.). Note: Links to the abstract and full-text can be found at:
“Good Practice Principles in Modelling Defined Contribution Pension Plans,” by Kevin Dowd and David Blake (PI-1302, March 2013, .pdf format, 22p.).
We establish 15 good practice principles in modelling defined contribution pension plans. These principles cover the following issues: model specification and calibration; modelling quantifiable uncertainty; modelling member choices; modelling member characteristics, such as occupation and gender; modelling plan charges; modelling longevity risk; modelling the post-retirement period; integrating the preand post-retirement periods; modelling additional sources of income, such as the state pension and equity release; modelling extraneous factors, such as unemployment risk, activity rates, taxes and entitlements; scenario analysis and stress testing; periodic updating of the model and changing assumptions.
A. “Rethinking Elderly Poverty: Time for a Health Inclusive Poverty Measure?”A. by Sanders Korenman and Dahlia Remler (18900, March 2013, .pdf format, 68p.).
Census’s Supplemental Poverty Measure (SPM) nearly doubles the elderly poverty rate compared to the “Official” Poverty Measure (OPM), a result of the SPM subtraction of medical out-of-pocket (MOOP) expenditures from income. Neither the SPM nor OPM counts health benefits or assets as resources. Validation studies suggest that subtracting MOOP from resources worsens a poverty measure’s predictive validity and excluding assets exacerbates this bias, since assets fund MOOP.
The SPM is based on a 1995 NAS report that recommended a health-exclusive poverty measure, despite considering it, conceptually, a “second best” to a Health-Inclusive Poverty Measure (HIPM). We analyze the reasons for the NAS recommendation and argue that constructing a HIPM is now feasible if we conceptualize health needs as a need for health insurance, and if plans with non-risk-rated premiums and caps on MOOP are universally available, a condition largely met by the Affordable Care Act and Medicare Advantage Plans.
We describe four HIPM variants and present analyses that suggest the SPM treatment of MOOP results in a less valid measure of elderly poverty and an overstatement of the elderly poverty rate (by up to 5.5 percentage points or 50 percent). Many elderly classified as poor by the SPM’s unlimited MOOP deduction are not poorly insured persons with incomes near the poverty line, but well-insured persons with incomes well above the poverty line.
B. “Retirement Plan Type and Employee Mobility: The Role of Selection and Incentive Effects,” by Gopi Shah Goda, Damon Jones, and Colleen Flaherty Manchester (w18902, March 2013, .pdf format, 49p.).
Employer-provided pension plans may affect employee mobility both through an “incentive effect,” where the bundle of benefit characteristics such as vesting rules, pension wealth accrual, risk, and liquidity affect turnover directly, and a “selection effect,” where employees with different underlying mobility tendencies select across plans or across firms with different types of plans. In this paper, we quantify the role of selection by exploiting a natural experiment at a single employer in which an employee’s probability of transitioning from a defined benefit (DB) to a defined contribution (DC) pension plan was exogenously affected by default rules. Using regression discontinuity as well as differences-in-regression-discontinuities (DRD) methods, we find evidence that employees with higher mobility tendencies self-select into the DC plan. Our results suggest that selection likely contributes to the observed positive relationship between the transition from DB to DC plans and employee mobility in settings where employees sort into plans or employers. Counter to conventional wisdom, we find a negative direct effect of the DC plan on turnover relative to the DB plan, which underscores the multi-dimensional difference between these plans.
C. “Financial Education and Choice in State Public Pension Systems,” by Julie Agnew and Joshua Hurwitz (w18907, March 2013, .pdf format, 56p.).
As more and more public pension systems are shifting away from a defined benefit only framework, the complexity of the financial decisions facing public employees is increasing. This raises some concerns about the financial literacy of participants and their ability to make informed decisions. While surveys addressing financial education in private plans are available, little is known about what types of education and advice are offered in public plans. This paper fills this gap by presenting new results from the first National Public Pension Plan Financial Education Survey. The paper focuses specifically on primary defined contribution and hybrid plans. The results indicate that some form of education or advice is offered by every surveyed plan and that the sponsoring entity is actively involved in the development of the programs. However, it appears that legal uncertainties related to advice and education may be a problem for a few plans. In addition, more rigorous evaluation methods to test programs are needed. The paper concludes with suggestions for areas of future research.
Review of Economics and Statistics (Vol. 95, No. 1, March 2013).
“Analysis of pension reform scenarios in a rational world: An application of the NIBAX behavioural micro-simulation model,” by Justin van de Ven (Working Paper No. 117, March 2013, .pdf format, 60p.). Note: Links to the abstract and full-text can be found at:
A. “The Pensions Regulator: Powers to protect pension benefits,” by Djuna Thurley (SN04368, March 2013, .pdf format, 28p.).
B. “Pension scheme funding requirements,” by Djuna Thurley (SN04877, March 2013, .pdf format, 30p.).
A. “Public service pension age,” by Julia Lourie and Djuna Thurley (SN02209, March 2013, .pdf format, 22p.).
B. “Public service pension age – 2010 onwards,” by Djuna Thurley (SN06581, March 2013, .pdf format, 17p.).
C. “Social care reform: funding care for the future,” by Manjit Gheera and Robert Long (SN06391, March 2013, .pdf format, 16p.).
“Time to get engaged with super?” by Richard Denniss (March 2013, .pdf format, 12p.).
“Public Employee Pensions in Missouri: A Looming Crisis,” by Andrew G. Biggs (March 2013, .pdf format, 31p.).
A. “Pensions: annuities,” by Djuna Thurley (SN06552, March 2013, .pdf format, 12p.).
B. “Driving: older drivers,” by Louise Butcher (SN00409, March 2013, .pdf format, 5p.).
“State and Local Pension Costs: Pre-Crisis, Post-Crisis, and Post-Reform,” by Alicia H. Munnell, Jean-Pierre Aubry, Anek Belbase and Josh Hurwitz (SLP No. 30, March 2013, .pdf format, 12p.).
Journal of Pension Economics and Finance (Vol. 12, No. 2, April 2013).
“Challenges Facing Multiemployer Pension Plans: Reviewing the Latest Findings by PBGC and GAO,” a hearing held March 5, 2013 (witness statements available in .pdf format, full hearing can be viewed in Flash format, running time 1 hour 17 minutes).
“Aging and Pension Reform: Extending the Retirement Age and Human Capital Formation,” by Edgar Vogel, Alexander Ludwig, and Axel Boersch-Supan (w18856, March 2013, .pdf format, 42p.).
Projected demographic changes in industrialized and developing countries vary in extent and timing but will reduce the share of the population in working age everywhere. Conventional wisdom suggests that this will increase capital intensity with falling rates of return to capital and increasing wages. This decreases welfare for middle aged agents with assets accumulated for retirement. This paper addresses three important adjustments channels to dampen these detrimental effects of ageing: investing abroad, endogenous human capital formation and increasing the retirement age. Although non of these suggestions is new in itself, we examine their effects jointly in one coherent model. Our quantitative finding is that openness has a relatively mild effect. In contrast, endogenous human capital formation in combination with an increase in the retirement age has strong effects. Under these adjustments maximum welfare losses of demographic change for households alive in 2010 are reduced by about 3 percentage points.
Pension Trends has added a new chapter: Chapter 4: The Labour Market and Retirement (2013 Edition, February 2013, .pdf and HTML format).
A. “Trends in Mortality by NS-SEC at Older Ages in England and Wales, 1982-86 to 2002-06,” (February 2013, .pdf and HTML format, 26p.).
B. “2012 Annual Survey of Hours and Earnings: Summary of Pension Results,” (February 2013, .pdf and HTML format, 20p.).
“Pensions: income drawdown,” by Djuna Thurley (SN00712, February 2013, .pdf format, 31p.).
“Enabling and encouraging saving: the evidence around pension reform and saving,” by Nishan Shah (February 2013, .pdf format, 25p.).
“Public service pension reform: devolved administrations,” by Djuna Thurley (SN06545, February 2013, .pdf format, 14p.).
A. “State Pension age 2012 onwards,” by Djuna Thurley (SN06546, February 2013, .pdf format, 15p.).
B. “State Pension Uprating – 2010 onwards,” by Djuna Thurley (SN05649, February 2013, .pdf format, 16p.).
“Nine Fallacies Used to Defend Public-Sector Pensions,” by Jason Richwine (February, 2013, .pdf format, 8p.).
First International Conference on Pension Systems Sustainability, to be held Feb. 21-22, 2013 at Sapienza University in Rome, Italy. For more information see:
“Locally-Administered Pension Plans,” by Alicia H. Munnell, Jean-Pierre Aubry and Josh Hurwitz (SLP No. 29, February 2013, .pdf format, 17p.).
A. “It Pays to Set the Menu: Mutual Fund Investment Options in 401(k) Plans,” by Veronika K. Pool, Clemens Sialm, and Irina Stefanescu (w18764, February 2013, .pdf format, 51p.).
This paper investigates whether mutual fund families acting as trustees of 401(k) plans display favoritism toward their own funds. Using a hand-collected dataset on retirement investment options, we show that poorly-performing funds are less likely to be removed from and more likely to be added to a 401(k) menu if they are affiliated with the plan trustee. We find no evidence that plan participants undo this affiliation bias through their investment choices. Finally, the subsequent performance of poorly-performing affiliated funds indicates that these trustee decisions are not information driven and are costly to retirement savers.
B. “On Financing Retirement with an Aging Population,” by Ellen R. McGrattan and Edward C. Prescott (w18760, February 2013, .pdf format, 37p.).
A problem facing the United States is financing retirement consumption as its population ages. Policy analysts increasingly advocate savings-for-retirement systems, but are concerned with insufficient savings opportunities with limited government debt. This concern is unwarranted. First, there is more productive capital than commonly assumed in macroeconomic modeling. Second, if the policy reform subsumes the elimination of capital income taxes, then the value of business equity increases relative to the capital stock. Phasing in a switch from the current U.S. system to a savings-for-retirement system without capital income taxes increases welfare of all current and future cohorts.
C. “Empirical Determinants of Intertemporal Choice,” by Jeffrey R. Brown, Zoran Ivkovic, and Scott Weisbenner (w18755, February 2013, .pdf format, 50p.).
We study the empirical determinants of intertemporal choice by analyzing a unique decision Croatian retirees made recently about whether to accept an immediate pension payment or a larger stream of delayed payments. Individual decisions are correlated in sensible ways with income, liquidity constraints, longevity expectations, and other covariates. Attitudes toward government also matter: those less confident that the government will honor its commitments are more likely to take the immediate stream of payments. Those who believe it is important to receive ‘the full amount due, no matter how long it takes’ are substantially more likely to take the delayed payments.
“A healthier way to de-risk: The introduction of medical underwriting to the defined benefit de-risking market,” (February 2013, .pdf format, 57p.).
A. “What drives pension indexation in turbulent times? An empirical examination of Dutch pension funds,” by Dirk Broeders, Paul Hilbers and David Rijsbergen (Working Paper No. 368, January 2013, .pdf format, 46p.). Note: Links to the abstract and full-text can be found at:
B. “Are Retirement Decisions Vulnerable to Framing Effects? Empirical Evidence from NL and the US,” by Federica Teppa and Maarten van Rooij (Working Paper No. 366, December 2012, .pdf format, 46p.). Note: Links to the abstract and full-text can be found at:
A. “Multiemployer Pension Plans: Report to Congress Required by the Pension Protection Act of 2006,” (January 2013, .pdf format, 78p.).
B. “PBGC Insurance of Multiemployer Pension Plans,” (January 2013, .pdf format, 16p.).
“Pension Savings: Are Workers Saving Enough for Retirement?” a hearing held January 31, 2013 (witness statements available in .pdf format, full hearing is available in Flash Player format, running time 1 hour 47 minutes).
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