In a rich, calibrated life-cycle model, we show that well-designed mandatory pension plans significantly improve the welfare of individuals procrastinating on savings or not investing in stocks, and even improve rational individuals' welfare through a return tax advantage and fair annuitization. For a group of heterogeneous savers, in terms of preferences and sophistication, the best plan has contributions of 9% of income from age 30, a glidepath investment strategy, payouts following a variable lifelong annuity, and options to choose a different investment strategy and to de-select the annuitization feature. This plan generates an average welfare gain of $233,000 per individual.
{"title":"The Design and Welfare Implications of Mandatory Pension Plans","authors":"L. S. Larsen, Claus Munk","doi":"10.2139/ssrn.3415132","DOIUrl":"https://doi.org/10.2139/ssrn.3415132","url":null,"abstract":"In a rich, calibrated life-cycle model, we show that well-designed mandatory pension plans significantly improve the welfare of individuals procrastinating on savings or not investing in stocks, and even improve rational individuals' welfare through a return tax advantage and fair annuitization. For a group of heterogeneous savers, in terms of preferences and sophistication, the best plan has contributions of 9% of income from age 30, a glidepath investment strategy, payouts following a variable lifelong annuity, and options to choose a different investment strategy and to de-select the annuitization feature. This plan generates an average welfare gain of $233,000 per individual.","PeriodicalId":400499,"journal":{"name":"SIRN: Employment-Based Pensions (Topic)","volume":"13 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-10-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123882709","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper explains how state governments could create new low-cost lifetime assurance funds to help provide retirement income security for millions of private-sector workers who currently lack pension coverage. Basically, an assurance fund operates like a mutual fund held within a defined contribution plan, but with the added features of mortality pooling and fully-funded lifetime payouts. As we envision them, assurance funds would be offered as annuity-like investment options on the new investment platforms being created by states like Oregon, California, and Maryland that offer their citizens the opportunity to participate in state-sponsored retirement savings plans. Adding an assurance fund could effectively turn these retirement savings plans into lifetime pensions. To ensure their sustainability, assurance funds would operate under a strict budget constraint and be organized as either tontines or pooled annuities.
{"title":"State-Sponsored Pensions for Private Sector Workers: The Case for Pooled Annuities and Tontines","authors":"Richard K. Fullmer, J. Forman","doi":"10.2139/ssrn.3660125","DOIUrl":"https://doi.org/10.2139/ssrn.3660125","url":null,"abstract":"This paper explains how state governments could create new low-cost lifetime assurance funds to help provide retirement income security for millions of private-sector workers who currently lack pension coverage. Basically, an assurance fund operates like a mutual fund held within a defined contribution plan, but with the added features of mortality pooling and fully-funded lifetime payouts. As we envision them, assurance funds would be offered as annuity-like investment options on the new investment platforms being created by states like Oregon, California, and Maryland that offer their citizens the opportunity to participate in state-sponsored retirement savings plans. Adding an assurance fund could effectively turn these retirement savings plans into lifetime pensions. To ensure their sustainability, assurance funds would operate under a strict budget constraint and be organized as either tontines or pooled annuities.","PeriodicalId":400499,"journal":{"name":"SIRN: Employment-Based Pensions (Topic)","volume":"53 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-07-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"129444956","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The OregonSaves program began in July 2017 to provide defined contribution (DC) plan coverage for those workers in the state of Oregon who are not currently eligible for an employer-sponsored DC plan. The program requires employers to automatically enroll workers into a post-tax individual retirement account (IRA). The program’s default contribution rate is 5 percent; contributions automatically increase by 1 percent each year until they reach 10 percent (unless the employee opts out of automatic increases). Employees can opt out of the program or choose a savings rate of as little as 1 percent and as much as 100 percent of gross pay, up to annual Roth IRA contribution limits. With more than a year of experience with the OregonSaves plan, the Employee Benefit Research Institute (EBRI) asked the question: What if OregonSaves were a national program? How would that impact the retirement security of American workers? We further asked how a national version of OregonSaves would compare with nationwide implementation of 401(k) safe harbor plans among employers who do not currently offer a defined benefit (DB) or DC plan. We examined both using EBRI’s Retirement Security Projection Model® (RSPM). The incremental benefit of including a full auto portability system in addition to these changes was also simulated. We found that the “national” OregonSaves plan would provide a 16.3 percent reduction in retirement deficits (as measured by the average retirement savings shortfalls (RSS)) for the youngest age cohort simulated (those currently ages 35–39). The reduction would be smaller for those closer to age 65, with the reduction being only 3.1 percent for those currently ages 60–64. Overall, this would reduce the simulated retirement deficits by $456 billion, or 12 percent of the $3.83 trillion under the baseline assumptions. In contrast, the 401(k) safe harbor plan expansion would reduce the retirement deficits for the youngest cohort by an additional 8.8 percentage points (for an overall reduction of 25.2 percent). The additional reduction for those ages 40–44 would be slightly higher (9.2 percentage points), but by ages 60–64 the additional reduction would only be 2.5 percentage points. Overall, this scenario would reduce the simulated retirement deficits by $645 billion, or 17 percent of the $3.83 trillion under the baseline assumptions. Finally, we added a full auto portability scenario to both of the access expansion scenarios. Under the “national” OregonSaves plan with a full auto portability scenario, simulated retirement deficits would be reduced by $759 billion, or 20 percent of the $3.83 trillion under the baseline assumptions. Under the 401(k) safe harbor plan expansion with a full auto portability scenario, simulated retirement deficits would be reduced by $1,031 billion, or 27 percent of the $3.83 trillion under the baseline assumptions.
{"title":"What if OregonSaves Went National: A Look at the Impact on Retirement Income Adequacy","authors":"Jack L. VanDerhei","doi":"10.2139/ssrn.3484394","DOIUrl":"https://doi.org/10.2139/ssrn.3484394","url":null,"abstract":"The OregonSaves program began in July 2017 to provide defined contribution (DC) plan coverage for those workers in the state of Oregon who are not currently eligible for an employer-sponsored DC plan. The program requires employers to automatically enroll workers into a post-tax individual retirement account (IRA). The program’s default contribution rate is 5 percent; contributions automatically increase by 1 percent each year until they reach 10 percent (unless the employee opts out of automatic increases). Employees can opt out of the program or choose a savings rate of as little as 1 percent and as much as 100 percent of gross pay, up to annual Roth IRA contribution limits. \u0000 \u0000With more than a year of experience with the OregonSaves plan, the Employee Benefit Research Institute (EBRI) asked the question: What if OregonSaves were a national program? How would that impact the retirement security of American workers? We further asked how a national version of OregonSaves would compare with nationwide implementation of 401(k) safe harbor plans among employers who do not currently offer a defined benefit (DB) or DC plan. We examined both using EBRI’s Retirement Security Projection Model® (RSPM). The incremental benefit of including a full auto portability system in addition to these changes was also simulated. \u0000 \u0000We found that the “national” OregonSaves plan would provide a 16.3 percent reduction in retirement deficits (as measured by the average retirement savings shortfalls (RSS)) for the youngest age cohort simulated (those currently ages 35–39). The reduction would be smaller for those closer to age 65, with the reduction being only 3.1 percent for those currently ages 60–64. Overall, this would reduce the simulated retirement deficits by $456 billion, or 12 percent of the $3.83 trillion under the baseline assumptions. \u0000 \u0000In contrast, the 401(k) safe harbor plan expansion would reduce the retirement deficits for the youngest cohort by an additional 8.8 percentage points (for an overall reduction of 25.2 percent). The additional reduction for those ages 40–44 would be slightly higher (9.2 percentage points), but by ages 60–64 the additional reduction would only be 2.5 percentage points. Overall, this scenario would reduce the simulated retirement deficits by $645 billion, or 17 percent of the $3.83 trillion under the baseline assumptions. \u0000 \u0000Finally, we added a full auto portability scenario to both of the access expansion scenarios. Under the “national” OregonSaves plan with a full auto portability scenario, simulated retirement deficits would be reduced by $759 billion, or 20 percent of the $3.83 trillion under the baseline assumptions. Under the 401(k) safe harbor plan expansion with a full auto portability scenario, simulated retirement deficits would be reduced by $1,031 billion, or 27 percent of the $3.83 trillion under the baseline assumptions.","PeriodicalId":400499,"journal":{"name":"SIRN: Employment-Based Pensions (Topic)","volume":"38 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-11-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"129844640","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The types of pension plans offered to Canadian employees are changing. As membership in traditional defined-benefit pension plans declines, plans in which benefits are contingent on the financial status of the plan are becoming more common. Rather than placing all the risk on sponsors to deliver guaranteed benefits to members, these contingent pension plans require members to take on at least some of the risk that benefits may or may not meet expectations. At the same time, the term “sustainability” has risen to the fore of pension discussions. But what does it mean in the new context for pensions? How can it be achieved? What are the implications for regulatory policy? We explored these questions in interviews with 30 key experts on the front lines of this pension evolution and provide a summary of their insights in this Commentary. We then draw conclusions about how regulatory policy can best adapt to the emerging paradigm. While the term sustainability has become widely used, many respondents reported using it without having an official definition. When probed for their own definitions and interpretations, their responses varied but usually contained elements such as: long horizon, affordability, and a commitment to members’ financial wellness in terms of providing a meaningful benefit. Many view sustainability as a balancing act between the needs of the present and the needs of the future. In fact, there is a strong intergenerational equity component that appears to be tied up in the definition of sustainability, and this is emerging more and more in discussions of contingent pension plans. When asked about what needs to be in place for a plan to be, or to become, sustainable, respondents surprised us by identifying a wide range of other factors in addition to financial measures, including the design and nature of the plan, governance, and communication with stakeholders. Contingent pension plans will likely play an increasingly important role in delivering retirement benefits in the future. They offer a different promise than traditional defined-benefit plans and the contract with plan members is different. This needs to be reflected in how they are managed, communicated and regulated. The parties involved in setting pension policy and standards should spend more time understanding in-depth the existing practices of well-managed plans and seriously consider our recommendation that prescriptive standards focus on aspects such as governance and member communication, leaving financing-related standards to be principles-based.
{"title":"The Quest for Sustainability in Contingent Pension Plans","authors":"Barry Gros, Barbara Sanders","doi":"10.2139/ssrn.3460784","DOIUrl":"https://doi.org/10.2139/ssrn.3460784","url":null,"abstract":"The types of pension plans offered to Canadian employees are changing. As membership in traditional defined-benefit pension plans declines, plans in which benefits are contingent on the financial status of the plan are becoming more common. Rather than placing all the risk on sponsors to deliver guaranteed benefits to members, these contingent pension plans require members to take on at least some of the risk that benefits may or may not meet expectations. At the same time, the term “sustainability” has risen to the fore of pension discussions. But what does it mean in the new context for pensions? How can it be achieved? What are the implications for regulatory policy? We explored these questions in interviews with 30 key experts on the front lines of this pension evolution and provide a summary of their insights in this Commentary. We then draw conclusions about how regulatory policy can best adapt to the emerging paradigm. While the term sustainability has become widely used, many respondents reported using it without having an official definition. When probed for their own definitions and interpretations, their responses varied but usually contained elements such as: long horizon, affordability, and a commitment to members’ financial wellness in terms of providing a meaningful benefit. Many view sustainability as a balancing act between the needs of the present and the needs of the future. In fact, there is a strong intergenerational equity component that appears to be tied up in the definition of sustainability, and this is emerging more and more in discussions of contingent pension plans. When asked about what needs to be in place for a plan to be, or to become, sustainable, respondents surprised us by identifying a wide range of other factors in addition to financial measures, including the design and nature of the plan, governance, and communication with stakeholders. Contingent pension plans will likely play an increasingly important role in delivering retirement benefits in the future. They offer a different promise than traditional defined-benefit plans and the contract with plan members is different. This needs to be reflected in how they are managed, communicated and regulated. The parties involved in setting pension policy and standards should spend more time understanding in-depth the existing practices of well-managed plans and seriously consider our recommendation that prescriptive standards focus on aspects such as governance and member communication, leaving financing-related standards to be principles-based.","PeriodicalId":400499,"journal":{"name":"SIRN: Employment-Based Pensions (Topic)","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-09-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128207574","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2019-09-25DOI: 10.4324/9780429058103-29
Olaf van Vliet, K. Caminada, K. Goudswaard, Jinxian Wang
Given the ageing of the populations in many Western countries, older people constitute an important group in the analysis of poverty. In this chapter, we examine the poverty incidence among older people across LIS countries, relying on data from the Luxembourg Income Study. The data show that poverty rates are substantially reduced by redistribution via tax/benefit systems (mainly via pension benefits). Furthermore, the data show that old-age poverty rates and the antipoverty effect of pensions vary substantially across countries. Finally, in almost all countries, the poverty rates based on disposable income declined between 1985 and 2013. The reason for this reduction in old-age poverty is the increase of the poverty reducing effect of pension benefits). Interestingly, the trend in the poverty rates of the working age population differs from that of older people; in most countries of our sample, the poverty incidence increased for the working age population. However, it should be noted that in most Western countries, poverty rates for older people are still at a higher level than for the working age population.
{"title":"Poverty Reduction Among Older People Through Pensions: A Comparative Analysis","authors":"Olaf van Vliet, K. Caminada, K. Goudswaard, Jinxian Wang","doi":"10.4324/9780429058103-29","DOIUrl":"https://doi.org/10.4324/9780429058103-29","url":null,"abstract":"Given the ageing of the populations in many Western countries, older people constitute an important group in the analysis of poverty. In this chapter, we examine the poverty incidence among older people across LIS countries, relying on data from the Luxembourg Income Study. The data show that poverty rates are substantially reduced by redistribution via tax/benefit systems (mainly via pension benefits). Furthermore, the data show that old-age poverty rates and the antipoverty effect of pensions vary substantially across countries. Finally, in almost all countries, the poverty rates based on disposable income declined between 1985 and 2013. The reason for this reduction in old-age poverty is the increase of the poverty reducing effect of pension benefits). Interestingly, the trend in the poverty rates of the working age population differs from that of older people; in most countries of our sample, the poverty incidence increased for the working age population. However, it should be noted that in most Western countries, poverty rates for older people are still at a higher level than for the working age population.","PeriodicalId":400499,"journal":{"name":"SIRN: Employment-Based Pensions (Topic)","volume":"27 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-09-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126480872","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Although tax relief on pensions is a controversial area of government expenditure, this is the first study of the tax effects for a real world defined benefit pension scheme. First, we estimate the tax and national insurance contribution (NIC) effects of the scheme’s change from final salary to career average revalued earnings (CARE) in 2011 on the gross and net wealth of the sponsor, government, and 16 age cohorts of members, deferred pensioners and pensioners. Second, we measure the size of the twelve income tax and NIC payments and reliefs for new members and the sponsor, before and after the rule changes. We find the total subsidy split is roughly 40% income tax subsidy; and 60% NIC subsidy. If lower tax rates in retirement and the risk premium effect of the exempt-exempt-taxed (EET) system are not viewed as a tax subsidy, the tax subsidy to members largely disappears. Any remaining subsidy drops, as a proportion of pension benefits, for high earners; as does that for NICs.
{"title":"Taxation, Pension Schemes and Stakeholder Wealth","authors":"Emmanouil Platanakis, C. Sutcliffe","doi":"10.2139/SSRN.3039364","DOIUrl":"https://doi.org/10.2139/SSRN.3039364","url":null,"abstract":"Although tax relief on pensions is a controversial area of government expenditure, this is the first study of the tax effects for a real world defined benefit pension scheme. First, we estimate the tax and national insurance contribution (NIC) effects of the scheme’s change from final salary to career average revalued earnings (CARE) in 2011 on the gross and net wealth of the sponsor, government, and 16 age cohorts of members, deferred pensioners and pensioners. Second, we measure the size of the twelve income tax and NIC payments and reliefs for new members and the sponsor, before and after the rule changes. We find the total subsidy split is roughly 40% income tax subsidy; and 60% NIC subsidy. If lower tax rates in retirement and the risk premium effect of the exempt-exempt-taxed (EET) system are not viewed as a tax subsidy, the tax subsidy to members largely disappears. Any remaining subsidy drops, as a proportion of pension benefits, for high earners; as does that for NICs.","PeriodicalId":400499,"journal":{"name":"SIRN: Employment-Based Pensions (Topic)","volume":"8 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-09-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128559921","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We study how retail savings products can share market risk across investor cohorts, thereby completing financial markets. Financial intermediaries smooth returns by varying reserves, which are passed on between successive investor cohorts, thereby redistributing wealth across cohorts. Using data on euro contracts sold by life insurers in France, we estimate this redistribution to be large: 0.8% of GDP. We develop and provide evidence for a model in which low investor sophistication, while leading to individually suboptimal decisions, improves risk sharing by allowing intercohort risk sharing.
{"title":"Can Risk Be Shared Across Investor Cohorts? Evidence from a Popular Savings Product","authors":"J. Hombert, V. Lyonnet","doi":"10.2139/ssrn.3420354","DOIUrl":"https://doi.org/10.2139/ssrn.3420354","url":null,"abstract":"\u0000 We study how retail savings products can share market risk across investor cohorts, thereby completing financial markets. Financial intermediaries smooth returns by varying reserves, which are passed on between successive investor cohorts, thereby redistributing wealth across cohorts. Using data on euro contracts sold by life insurers in France, we estimate this redistribution to be large: 0.8% of GDP. We develop and provide evidence for a model in which low investor sophistication, while leading to individually suboptimal decisions, improves risk sharing by allowing intercohort risk sharing.","PeriodicalId":400499,"journal":{"name":"SIRN: Employment-Based Pensions (Topic)","volume":"61 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125150477","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract In this paper we investigate an optimal investment problem under short-selling and portfolio insurance constraints faced by a defined contribution pension fund manager who is loss averse. The financial market consists of a cash bond, an indexed bond and a stock. The manager aims to maximize the expected S-shaped utility of the terminal wealth exceeding a minimum guarantee. We apply the dual control method to solve the problem and derive the representations of the optimal wealth process and trading strategies in terms of the dual controlled process and the dual value function. We also perform some numerical tests and show how the S-shaped utility, the short-selling constraints and the portfolio insurance impact the optimal terminal wealth.
{"title":"Optimal Investment of DC Pension Plan Under Short-Selling Constraints and Portfolio Insurance","authors":"Yinghui Dong, Harry Zheng","doi":"10.2139/ssrn.3244153","DOIUrl":"https://doi.org/10.2139/ssrn.3244153","url":null,"abstract":"Abstract In this paper we investigate an optimal investment problem under short-selling and portfolio insurance constraints faced by a defined contribution pension fund manager who is loss averse. The financial market consists of a cash bond, an indexed bond and a stock. The manager aims to maximize the expected S-shaped utility of the terminal wealth exceeding a minimum guarantee. We apply the dual control method to solve the problem and derive the representations of the optimal wealth process and trading strategies in terms of the dual controlled process and the dual value function. We also perform some numerical tests and show how the S-shaped utility, the short-selling constraints and the portfolio insurance impact the optimal terminal wealth.","PeriodicalId":400499,"journal":{"name":"SIRN: Employment-Based Pensions (Topic)","volume":"85 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-09-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130883651","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper describes the current Swiss occupational pension system with a focus on its governance aspects by emphasizing on the minimum guarantees established by the law, the governance-related requirements, and the most recent supervision framework. It documents in details how the various and different Swiss pension funds are organised and identify six key structure characteristics to classify them. The major distinction with other country’s pension systems is that pure defined-contributions plans do not exist in Switzerland. Finally, the paper highlights the pending trust issue of Swiss people and its potential threat to the present pension system.
{"title":"The Swiss Occupational Pension System: A Governance View","authors":"Nadège Bregnard","doi":"10.2139/ssrn.2968951","DOIUrl":"https://doi.org/10.2139/ssrn.2968951","url":null,"abstract":"This paper describes the current Swiss occupational pension system with a focus on its governance aspects by emphasizing on the minimum guarantees established by the law, the governance-related requirements, and the most recent supervision framework. It documents in details how the various and different Swiss pension funds are organised and identify six key structure characteristics to classify them. The major distinction with other country’s pension systems is that pure defined-contributions plans do not exist in Switzerland. Finally, the paper highlights the pending trust issue of Swiss people and its potential threat to the present pension system.","PeriodicalId":400499,"journal":{"name":"SIRN: Employment-Based Pensions (Topic)","volume":"170 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2017-06-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"132414391","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This Chapter is a scene-setter for the remainder of the Report. We begin by considering how pension schemes have traditionally been used and also how they are likely to be used in future following the introduction of the pension reforms announced in the 2014 Budget. These reforms furnish us with an opportunity to ask anew what a ‘good’ pension scheme should aim to achieve. There are also risks involved in the provision of pensions and we discuss the key ones. Unfortunately, widespread evidence shows that many if not most pension scheme members do not understand these risks and are unlikely ever to do so, however much guidance or education they receive. This will make it difficult for many of them to make informed choices about how they spend their retirement savings that takes these risks into account. This, in turn, raises the question about whether scheme members should be nudged (or even defaulted) into a well-designed decumulation product that has dealt with these risks in the most efficient and cost-effective ways possible – with the option to opt out, as in the case of auto-enrolment. We then consider the different types of pension member affected by the reforms. Finally, we discuss the attitudes of employers, consultants, providers, investment managers, and trade unions to the reforms.
{"title":"Chapter 1: 'Introduction'","authors":"D. Blake","doi":"10.2139/ssrn.3618626","DOIUrl":"https://doi.org/10.2139/ssrn.3618626","url":null,"abstract":"This Chapter is a scene-setter for the remainder of the Report. We begin by considering how pension schemes have traditionally been used and also how they are likely to be used in future following the introduction of the pension reforms announced in the 2014 Budget. These reforms furnish us with an opportunity to ask anew what a ‘good’ pension scheme should aim to achieve. There are also risks involved in the provision of pensions and we discuss the key ones. Unfortunately, widespread evidence shows that many if not most pension scheme members do not understand these risks and are unlikely ever to do so, however much guidance or education they receive. This will make it difficult for many of them to make informed choices about how they spend their retirement savings that takes these risks into account. This, in turn, raises the question about whether scheme members should be nudged (or even defaulted) into a well-designed decumulation product that has dealt with these risks in the most efficient and cost-effective ways possible – with the option to opt out, as in the case of auto-enrolment. We then consider the different types of pension member affected by the reforms. Finally, we discuss the attitudes of employers, consultants, providers, investment managers, and trade unions to the reforms.","PeriodicalId":400499,"journal":{"name":"SIRN: Employment-Based Pensions (Topic)","volume":"49 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2016-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"133275310","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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