creator: Weaver, R. Kent
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The Politics of Pension Reform in Canada and the United States
description- – Cutting pensions for the elderly is a difficult task for any government. The elderly are a large, politically active group, and they are viewed sympathetically by the rest of the electorate. In pension programs that are based on a system of contributory social insurance, a sense that benefits have been"earned"adds to recipients' perception of entitlement and inviolability of prior commitments. Moreover, even those who are too young to receive old age pensions currently may view themselves as being indirectly hurt by cutbacks, either because it will lower their benefits in the future, or because it will force them to give additional help to elderly relatives. Yet reform of public pensions has been very much on the agenda in both Canada and the United States.The first section of this paper outlines the common pressures that have given rise to pension reform initiatives in the United States and Canada, and discusses how differences in political institutions and policy legacies that might lead to different policy outcomes. The middle two sections review the experiences of the two countries with pension retrenchment. The final section reflects on and tries to draw lessons from these experiences about the political limits on pension reform specifically and loss-imposition generally in the two political systems.
- – 1999-11-01
- – application/pdf
The Senior Income Guarentee (SIG): A New Proposal to Reduce Poverty Among the Elderly
description- – Social Security reform is back near the top of the public agenda after a 15-year absence. The Bush administration seeks a partial privatization of Social Security, while avoiding new payroll taxes. The administration will almost certainly try to limit its agenda to the creation of an individual account system of some sort. But the debate will not necessarily be limited to that issue, nor should it. The narrowness of political margins in Congress, the absence of a strong electoral mandate for the president, and the widespread popularity of the current Old Age and Survivors Insurance (OASI) system suggest that if some type of plan for individual accounts is to be enacted, political and policy tradeoffs will have to be made to assemble a winning coalition. Supporters of the Bush administration and skeptics alike should be prepared with thoughtful proposals to improve the overall quality of the income retirement system in the United States, while offering the potential to facilitate agreement on a broader Social Security reform package.One of the key tradeoffs that such a reform package faces is the one between the benefit risks inherent in the transformation to a privatized system compared to a guaranteed level of benefit adequacy in old age. We address this tradeoff by proposing an effective and relatively inexpensive program to provide a minimally adequate floor to old age income through the Social Security system. This Senior Income Guarantee (SIG) provides a cost-effective method for reducing elder poverty to very low levels. Thus, it provides a counterbalance to the old age income risks inherent in a partially privatized Social Security system.
- – 2001-12-01
- – application/pdf
New Zealand: The Supreme Political Football
description- – New Zealand, like Australia, entered the 1980s without a mandatory earnings-related pension program. Unlike Australia, however, New Zealand also ended the twentieth century without such a program. Although the New Zealand pension system has been perhaps the most frequently changed of any of the six countries considered here, the basic shape of that program remains very close to what it was two decades ago. Indeed, one prominent analyst of New Zealand pension policy has likened it to an "old-fashioned wobble doll [which] has taken many a thump from politicians in the last decade. But like the wobble doll, after some gravity-defying oscillations it returns to much the same position...of a basic, flat-rate, taxable, individual state pension, no compulsory private saving and no tax incentives..." Understanding those two seemingly conflicting attributes of New Zealand pensions--frequent pension policy change and the absence of a fundamental transformation of pension policy--is one of the primary objectives of this chapter.The other primary objective concerns the lessons that New Zealand experience has to offer about the politics of major pension reforms. Since 1997, New Zealand has seriously both a move to an individual account system and a large collective investment fund. A contributory, individual accounts plan (although without earnings-related benefits) was put before voters in a 1997 referendum, and overwhelmingly rejected. A collective investment fund proposed by the current Labour-Alliance coalition government was enacted by Parliament in 2001, but it remains vulnerable to dismantling by a future government. Are there lessons that New Zealand can offer about the political hurdles that are likely to arise with each of these reform proposals? And does New Zealand suggest any lessons about ways in which these hurdles can be resolved?
- – 2002-12-01
- – application/pdf
Whose Money Is It Anyhow?: Governance and Social Investment in Collective Investment Funds
description- – Over the past two decades, an aging population and budgetary stress have led to substantial changes in public pension systems throughout the world. Many countries initially responded to pension funding crises with incremental reforms. A number of countries have also engaged in a more fundamental restructuring of their pension systems. Several other countries have also made changes in their defined benefit pensions. Finally, some countries have changed the governance of tax-privileged pension savings to provide increased incentives for private retirement savings, despite very mixed evidence about whether such incentives are effective in increasing overall savings rates. These seemingly disparate responses to the pension funding crisis in fact raise a common set of issues about the public/private divide in governance of such funds. Should their purpose be solely to maximize returns for their (individual or collective) beneficiaries, or should they serve "public" ends as well? This paper examines how several OECD countries have addressed the "public/private divide" in collective investment"buffer"funds, drawing on the experience of Canada, New Zealand and Sweden, as well as the Swedish experience with a "default fund" (for those who do not make an active fund choice) in the individual account defined contribution tier of its public system.
- – 2003-05-01
- – application/pdf
The Politics of Public Pension Reform
description- – Public old-age pension programs are the largest single item of public expenditures in most advanced industrial countries. These pension systems have been buffeted by a number of pressures for change in recent years, however, notably an aging population, slower revenue growth, and competitive pressures to limit payroll taxes. Thus it is hardly surprising that pensions have received much attention from policymakers, and caused enormous political conflict, both in the United States and abroad. Policymakers have three very broad sets of options for responding to the increased funding demands of their pension systems: they can cut back on the generosity of specific provisions of their pension programs through retrenchment, refinance their pension programs, or restructure their pension programs. This paper attempts to understand cross-national patterns of pension policymaking as well as distinctive patterns in the United States.
- – 2003-05-01
- – application/pdf
Design and Implementation Issues in Swedish Individual Pension Accounts
description- – Sweden's new multi-pillar pension system includes a system of mandatory fully-funded individual accounts. The Swedish system tries to keep administrative costs down through centralized management of the collection of contributions, switching among fund options, and record-keeping and communication with account holders.The Swedish system offers contributors more than 600 fund options. However, in the most recent rounds of fund choice, more than 90 percent of new labor market entrants have not made an active choice of funds, and thus have ended up in a government-sponsored default fund.The Swedish system of individual accounts offers a number of lessons for countries considering adoption of a mandatory individual account tier. First, centralized administration of record-keeping, communication and trading functions can help to keep administrative costs down. Second, the lead time needed to set up such a system is considerable. Third, if entry barriers for funds are low, a very large number of fund options are likely to be offered. Fourth, engaging new labor market entrants in fund choice is likely to be difficult, and these barriers are likely to be particularly high for some groups-notably those with limited incomes and low English language skills. Fifth, in the absence of entry barriers for funds, a significant percentage of those making an active fund choice may choose funds that are very specialized and risky. Finally, the likelihood of limited active fund choice means that special care must be devoted both to the design of a default fund and to communicating to potential participants what asset allocation and risk-return trade-offs the default fund is likely to make.
- – 2005-04-01
- – application/pdf
Lashed to the Mast?: The Politics of Notional Defined Contribution Pension Reforms
description- – Over the past decade, a number of countries have adopted a new form of pension system known as"notional defined contribution"(NDC) pensions. Like traditional defined benefit (DB) pensions, NDC pensions operate largely on a pay-as-you-go basis, but base benefits on total lifetime contributions rather than those in a specified number of peak earnings years. Payroll tax rates are (at least in theory) permanently fixed, while adjustments necessitated by demographic change and slow economic growth are automatically made on the benefit side. The authors argue that adoption of NDC-based reforms reflects political as well as policy considerations. The article analyzes a variety of conditions that have led some countries to adopt NDC-based reforms while such reforms have not even reached the agenda in others. The authors point out a number of problems that may arise during implementation of NDC-based reforms that undercut their potential benefits, and argue that erosion of NDC-based reforms is more likely than outright reversal.
- – 2005-01-01
- – application/pdf
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