IT
Inapp’s non-periodical publications are designed to collect the outcomes of technical and scientific activity carried out by the Institute and put them to good use. They consist of four institutional series (Inapp Report, Inapp Paper, Inapp Policy brief, Inapp Working paper) and occasional out-of-series publications (Inapp Report, as well as other ex-lege institutional reports), all of which can be found in the open-access archive. All of Inapp’s publications and documents – including technical reports, Inapp’s researchers’ articles and presentations -are accessible through the Open archive.
153 Risultati
Harnessing a young nation's demographic dividends through a universal NDC pension scheme: a case study of Tanzania
05-08-2019
Larsson Bo, Leyaro Vincent, Palmer Edward
About one-half of Africa’s population will remain below age 30 well past 2050, with relatively few aged 60 and older. Using Tanzania’s projected demographics and present economic point of departure, this paper demonstrates how the implicit “double” demographic dividend can be harnessed to create inclusive growth. A Swedish-style nonfinancial defined contribution (NDC) system is launched where the government can borrow funds from the future through NDC “consol” bonds to transform individual savings into human and physical capital to promote inclusive economic growth. The consol bonds constitute a reserve to cover pensions of the retiring “demographic bubble” in the future as the dependency ratio gradually glides into demographic equilibrium. Minimum transfers to the current elderly are also introduced with the phase-in.
The notional and the real in China’s pension reforms
04-08-2019
Lu Bei, Piggott John, Zheng Bingwen
This paper discusses the potential expansion of the role of the notional defined contribution (NDC) paradigm in the ongoing reforms of retirement provision in China. It finds that mature age life expectancy is remarkably uniform among formal sector workers at the time of retirement, although greater heterogeneity does exist for Rural and Urban Residents Pension Scheme members. The implications of a stylized NDC structure are examined covering China’s major pension systems, calibrated to be actuarially neutral. Each system has a different contribution rate and retirement age, consistent with different life expectancies. A complementary social pension is also proposed. The paper concludes that an increased presence of the NDC paradigm has the potential to raise aggregate welfare.
Administrative requirements and prospects for universal NDCs in emerging economies
03-08-2019
Palacios Robert
Many public policies are impossible to implement without adequate administrative systems in place. This is true for modern pension schemes and in particular, notional defined contribution (NDC) schemes. Today these systems must be digital yet most pension systems predate computerization and must find a way to bridge past and present. The shift from defined benefit (DB) to NDC brings particular challenges in recordkeeping. This paper briefly reviews the administrative requirements of NDCs and offers a simple checklist for countries considering this type of reform. The last section describes a universal NDC scheme that harnesses the modern digital infrastructure that may allow developing countries to overcome the limitations of traditional contributory systems and their reliance on payroll taxes.
Bridging partner lifecycle earnings and pension gaps by sharing NDC accounts
02-08-2019
Klerby Anna, Larsson Bo, Palmer Edward
Sweden’s gender pension gap is about 33 percent at retirement, reflecting the gender earnings gap – itself a reflection of a structural gender difference in low-pay jobs for women and men and career advancement opportunities. The individual nonfinancial defined contribution (NDC) account data examined show that the allocation of time to informal care work in the home versus formal market work is the main determinant of the gaps. A case is presented for sharing accounts as the default, making the cost of women’s time in home care explicit and negotiable, reducing the minimum guarantee pension’s role as an implicit tax-financed spousal subsidy. The paper also analyzes the likelihood of needing a guarantee and the effect of sharing under various circumstances.
The impact of lifetime events on pensions: NDC schemes in Poland, Italy, and Sweden and the point scheme in Germany
01-08-2019
Chlon-Dominczak Agnieszka, Gora Marek, Kotowska Irena E., Magda Iga, Ruzik-Sierdzinska Anna, Strzelecki Paweł
The paper focuses on the interrupted careers in four countries where pensions are based on lifetime labor income, but they have different labor market patterns. High levels of employment in Germany and Sweden are in contrast with low levels of employment, particularly for women, in Italy and Poland. Career interruptions of women in Italy mean early withdrawal from the labor market, while in Sweden women choose part-time employment. Lower employment rates and gender pay gaps are important causes of differences in expected pension levels. The pension system design and demographics are also different. Prolonging working lives and reducing gender gaps in employment and pay, particularly for those at risk of interrupted careers, is key to ensure decent old-age pensions.
Drivers of the gender gap in pensions: evidence from EU-SILC and the OECD pension model
31-07-2019
Lis Maciej, Bonthuis Boele
This paper explores trends and drivers behind the gender gap in pensions (GGP) in Europe, focusing on countries with notionally defined contribution (NDC) schemes: Italy, Latvia, Norway, Poland, and Sweden. Based on current gender gaps on the labor market, the paper relates the progressivity of pension systems and the coverage of child care-related spells to the GGP. It shows that NDC countries do not stand out as a group compared to other European countries in terms of pension outcomes for women. Nevertheless, NDC countries differ significantly from one another. Choices of indexation of pensions in payment and survivors’ pension options have a strong impact on gender inequalities. Still, labor market differences are the most important driver of the GGP.
Gender and family: conceptual overview
30-07-2019
Barr Nicholas
This paper starts from the fact that women receive lower pensions than men on average, and considers policies to address that fact. Women typically have lower wages than men, a greater likelihood of part-time work and more career breaks, and thus generally a less complete contribution record. In addition, pension age may be lower for women and annuities may be priced using separate life tables for women. The paper looks at three strategic ameliorative policy directions: policies intended to increase the size and duration of women’s earnings and hence improve their contribution records; policies to redirect resources within the pension system, including for survivors and after divorce; and ways of boosting women’s pensions with resources from outside the pension system.
Labor market participation and postponed retirement in central and eastern Europe
29-07-2019
Gal Robert I., Rado Marta
This paper shows that as the educational composition in the 55–64-year-old age bracket improved between the mid-1990s and the mid-2010s, the effective retirement age rose rapidly in the Central and Eastern European region. This increase was fast enough to keep life expectancies at the effective retirement age practically unchanged. In effect, the labor market absorbed all improvements in life expectancies in older working ages. The paper also shows that maintaining the current life expectancies at retirement over the next 30 years requires less effort in terms of further raising the effective retirement age than what the region achieved in this respect in the last 15 years.
NDC schemes and the labor market: issues and options
28-07-2019
Holzmann Robert, Robalino David, Hernan Winkler
Defined contribution (DC) schemes – whether unfunded or funded – are often considered superior to defined benefit (DB) schemes in their ability to address labor market issues, particular in encouraging formal employment and delayed retirement. Conceptually, the assessment is based on superior incentives to work and save. Yet economic and social realities are more complex. This paper explores design and labor market conditions that potentially constrain DC schemes. The paper concludes that to achieve their conceptual potential, DC schemes require design innovations, including a better integration of basic provisions and complementary labor policies that promote job creation in the formal sector and expand job opportunities during old age.
NDC schemes and heterogeneity in longevity: proposals for redesign
27-07-2019
Holzmann Robert, Alonso-Garcia Jennifer, Labit-Hardy Heloise, Villegas Andres M.
A positive relationship between lifetime income and life expectancy leads to a redistribution mechanism when the average cohort life expectancy is applied for annuity calculation. Such a distortion puts into doubt the main features of the NDC (nonfinancial defined contribution) scheme and calls for alternative designs to compensate for the heterogeneity. This paper explores five key mechanisms of compensation: individualized annuities; individualized contribution rates; a two-tier contribution structure with socialized and individual rates; and two supplementary two-tier approaches to deal with the income distribution tails. Using unique American and British data, the analysis indicates that both individualized annuities and two-tier contribution schemes are feasible and effective and thus promising policy options. A de-pooling by gender will be required, however.
Annuities in (N)DC Pension Schemes: Design, Heterogeneity, and Estimation Issues
26-07-2019
Palmer Edward, de Gosson de Varennes Yuwei Zhao
This paper identifies and discusses four issues in creating annuities in (nonfinancial) defined contribution (NDC) schemes that are essential for systems’ financial stability and fair inter/intragenerational redistribution. The first issue is the choice between incorporating the rate of return into the annuity or into the exogenous indexation. The second issue is in choosing a projection method for life expectancy that produces systematically unbiased estimates. The third issue is at what age the projection of life expectancy is to be fixed over the remaining lifetime of the annuity. The final issue is the prevalence of socioeconomic heterogeneity within the insurance pool.
Overview on heterogeneity in longevity and pension schemes
25-07-2019
Lee Ron, Sanchez-Romero Miguel
Differences in life expectancy between high and low socioeconomic groups are often large and have widened in recent decades. In the United States, the differences may now be as large as 10 to 14 years. These longevity gaps strongly affect the actuarial fairness and progressivity of many public pension systems, raising the question of possible policy reforms to address this issue. This paper reviews the empirical literature on the longevity differences across socioeconomic groups and their impacts on lifetime benefits, considers how these impacts depend on four different pay-as-you-go pension structures (calibrated on the US case), and discusses some policy options.
Chile's Solidarity Pillar: A Benchmark for Adjoining Zero Pillar with DC Schemes
24-07-2019
Fajnzylber Eduardo
In 2008, Chile introduced a New Solidarity Pillar (NSP) designed to eliminate the incidence of poverty among elderly adults by setting a floor at around 40 percent of the minimum monthly income for the poorest 60 percent of the population. This paper describes the NSP’s main characteristics and the main results achieved during its first seven years of operations: coverage, fiscal cost, poverty reduction, and the system’s role in reducing the significant gender gap in pensions. Its effects on incentives to contribute are discussed, as well as the literature that has attempted to measure these effects. Finally, the main challenges facing the NSP and the implications for other countries under defined contribution pension schemes are summarized.
Sweden: adjoining the guarantee pension with NDC
23-07-2019
Nelson Kenneth, Nieuwenhuis Rense, Alm Susanne
This paper analyzes old-age incomes in Sweden from a pension policy perspective, focusing on both the economic position of elderly citizens and the redistributive effects of the pension system’s different parts. The empirical analyses show that each subsequent cohort that reaches retirement age faces higher relative poverty risks than previous cohorts. The relative decline in the value of the guaranteed minimum pension vis-à-vis the real income growth of wage earners brings to the forefront the issues of indexation of the guarantee and the ceiling on the meanstested housing benefits – i.e., the basic safety net for pensioners.
The ABCs of NDCs
22-07-2019
Holzmann Robert
Nonfinancial defined contribution (NDC) pension schemes have been successfully implemented since the mid-1990s in a number of European countries (Sweden. Italy, Latvia, Poland, and Norway). The NDC approach features the lifelong contribution–benefit link of a financial defined contribution scheme, but is based on the pay-as-you-go format. An NDC approach implemented by the rulebook can manage the economic and demographic risks inherent to a pension scheme and by design creates financial sustainability. This paper offers a nontechnical introduction to NDC schemes, their basic elements and advantages over nonfinancial defined benefit schemes, the key technical frontiers of the approach, and the experiences of countries with NDC schemes.
NDC: the generic old-age pension scheme
21-07-2019
Gora Marek, Palmer Edward
This paper defines a universal public pension scheme (UPPS) as a government-mandated lifecycle longevity insurance scheme that transfers individual consumption from the working years to retirement. It discusses the differences in four UPPS designs designated as either defined contribution (DC) or defined benefit (DB), and financial or nonfinancial. With individual DC accounts, the ball is in the individual’s court. The transparent link between contributions and retirement income is the enabler of efficiency that – through marginal decisions to choose formal work over informal work or leisure and to postpone retirement marginally toward the end of the working life – supports affordability and sustainability for a chosen level of adequacy. Hence, UPPS-DC designs are found superior to UPPS-DB designs.
The Greek Pension Reforms: Crises and NDC Attempts Awaiting Completion
20-07-2019
Nectarios Milton, Tinios Platon
Greece’s current pension system relies almost exclusively on the state and remains staunchly pay-as-you-go (PAYG) and defined benefit (DB). This paper offers a radical proposal for change: (i) a new multipillar notional and financial defined contribution (NDC and FDC) pension system for all generations first insured after 1993, with contribution rates for primary pensions reduced by 50 percent; and (ii) a transitional system for those first insured before 1993. The proposal’s robustness is tested actuarially for the period up to 2060. Though financing the legacy cost would be challenging, the quantitative exercise indicates that a radical pension reform, especially if implemented as a part of an overall recovery package, could set the country on a more favorable growth trajectory.
The Norwegian NDC Scheme: Balancing Risk Sharing and Redistribution
19-07-2019
Stolen Nils Martin, Fredriksen Dennis, Hernaes Erik, Holmoy Erling
The main goals of reforming the Norwegian old-age pension system toward nonfinancial defined contributions (NDC) in 2011 were to improve long-run fiscal sustainability and labor supply incentives. Maintaining much of the redistributive effects of the former public pension system was also an important concern. Econometric analyses reveal the 2011 reform’s significant effects on postponing retirement. Results from a dynamic microsimulation model show that the reform is expected to have substantial effects on old-age pension expenditures in the long run without any large negative distributional effects. Macroeconomic analyses indicate that the reform is likely to make a great fiscal impact in the long run, and higher employment plays an important role in this aspect.
The Polish NDC scheme: success in the face of adversity
18-07-2019
Buchholtz Sonia, Dominczak Chlon-Agnieszka, Gora Marek
Poland’s pension system faces multiple challenges, including accelerating population aging. Early retirement policy aimed at mitigating mass exit from the labor market led to the rise of pension system economic dependency. Transition to a nonfinancial and financial defined contribution (NDC+FDC) system in 1999 mitigated the fiscal risk and an unfair balance of interest between the working and retired generations. The new system separated the income allocation and redistribution. The retirement age was raised. However, the implementation of the new system is a case study of misuse for current political goals, ad hoc tweaks, and unfinished topics. Yet the 1999 pension reform met its goals.