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Pensions in the Public Sector Edited by Olivia S. Mitchell and
Edwin C. Hustead "An essential reference tool for actuaries and
others involved in government retirement systems. It also will
provide insight to the general public regarding the ways tax
dollars are being spent in this important arena."--"The Actuarial
Digest" Some 13 million public-sector workers in the United
States--including teachers, police and firefighters, state and
municipal employees, judges, and legislators--and another six
million federal and military employees participate in government
pension plans. These pension systems are extraordinarily diverse in
design, investment policy, and governance, and they face
substantial challenges as the government-sector workforce ages and
governments are asked to take on new and different tasks. Public
employee pensions are in deep trouble in many countries,
undermining economic policy and threatening retiree well being.
What can be done to help these programs perform more efficiently
and enhance old-age security? From the Pension Research Council of
the Wharton School, this volume takes stock of public pension
developments in the US and Canada, highlighting challenges these
financial institutions face in coming decades. The first Pension
Research Council study of public pensions in a quarter of a century
tackles these topics with an impressive team of international
actuarial, legal, and economic experts. Olivia S. Mitchell is
Executive Director of the Pension Research Council and
International Foundation of Employee Benefit Plans Professor of
Insurance and Risk Management at The Wharton School of the
University of Pennsylvania. Edwin C. Hustead is Senior Vice
President at The Hay Group, Washington, D.C. Pension Research
Council Publications 2000 408 pages 6 1/8 x 9 1/4 71 tables ISBN
978-0-8122-3578-4 Cloth $89.95s 58.50 World Rights Economics,
Public Policy Short copy: From the Pension Research Council of the
Wharton School, this book explores the diversity of governmental
pension plans and investigates how these financial institutions
must change in years to come.
"This latest installment in the Pension Research Council series
brings together a wealth of information for those concerned with
public policy options. . . .The book is substantive. . . . It
provides data, estimates, models, and a framework to help readers
think about the underlying problems in the system."--"Industrial
and Labor Relations Review" The United States social security
system is the nation's largest social insurance program. As such,
it has a far-reaching impact throughout the economy, influencing
not only old-age economic security but also many behaviors,
including corporate employment policy, retirement patterns, and
personal saving. In the past, the system's universal coverage and
generous benefits ensured popular support to a degree enjoyed by no
other form of "big government" social spending. Yet over two-thirds
of all Americans today believe that the social security system will
face bankruptcy by the time they retire. The question of social
security reform--how to reform the system or whether the system
needs reform at all--is the subject of heated debate at all levels
of government, in the media, and among workers, pensioners, and
employers. "Prospects for Social Security Reform" informs the
debate by exploring why the system is at a crossroads today and
what to do about it. Contributors detail the size and nature of the
problem, explain views of key "stakeholders" regarding reform
options, and report new evidence on how reform might affect the
economy. Research findings and public opinion polls are analyzed,
as are lessons from other countries experimenting with new ways to
deliver old-age benefit promises. No other volume includes as
diverse and expert a set of perspectives on reform and
privatization as those gathered here from economists, actuaries,
employers, investment managers, and representatives of organized
labor. Among its chapters is the path-breaking study "Social
Security Money's Worth," the 1999 winner of the TIAA-CREF's Paul A.
Samuelson Award for Outstanding Scholarly Writing on Lifelong
Financial Security. Olivia S. Mitchell is Executive Director of the
Pension Research Council and Professor of Insurance and Risk
Management at The Wharton School, University of Pennsylvania.
Robert J. Myers is a Special Consultant to the Social Security
Division of William M. Mercer, Inc. and former Chief Actuary of the
Social Security System. Howard Young is a former Special Consultant
to the President of the United Auto Workers Union and former
Adjunct Professor of Mathematics at the University of Michigan.
As the United States comes to terms with the pending insolvency of
social security, workers are increasingly pinning their hopes for
retirement adequacy on employer-sponsored plans. Positioning
Pensions for the Twenty-First Century analyzes the role of pensions
in retirement security, examining how these programs will evolve to
meet the challenges to our nation's retirement system. The book
brings together a team of leading economists, corporate and labor
specialists, actuaries, and policy experts to examine the future of
retirement options within the context of emerging labor and
business trends and innovative developments in the pension
community. They show how a successful public and private pension
system can be sustained and strengthened and demonstrate how
employer pensions can be configured against a delicately financed
social insurance system. The book's contributions examine where
pensions have succeeded and failed over the last several decades
and point to positive new developments in the pension arena. Its
coverage includes innovative pension options such as hybrid and
cash-balance plans; pension funding regulations; changes in GATT
laws altering pension insurance premiums; and emerging developments
concerning administrative costs and pension obligation bonds. It
also features new research on defined contribution plan investment
options and includes three case studies of participant-directed
pension investments, telling how thousands of workers are
allocating their pension savings in 401(k) and related plans.
Positioning Pensions for the Twenty-First Century is essential
reading for all managers, employees, and policymakers concerned
with designing pension systems that can withstand the challenges of
the next decade.
This is an open access title available under the terms of a CC
BY-NC-ND 4.0 International licence. It is free to read at Oxford
Scholarship Online and offered as a free PDF download from OUP and
selected open access locations. Notwithstanding the terrible price
the world has paid in the coronavirus pandemic, the fact remains
that longevity at older ages is likely to continue to rise in the
medium and longer term. This volume explores how the private and
public sectors can collaborate via public-private partnerships
(PPPs) to develop new mechanisms to reduce older people's risk of
outliving their assets in later life. As this volume shows, PPPs
typically involve shared government financing alongside private
sector partner expertise, management responsibility, and
accountability. In addition to offering empirical evidence on
examples where this is working well, contributors provide case
studies, discuss survey results, and examine a variety of different
financial and insurance products to better meet the needs of the
aging population. This volume will be informative to researchers,
plan sponsors, students, and policymakers seeking to enhance
retirement plan offerings.
Many people need help planning for retirement, saving, investing,
and decumulating their assets, yet financial advice is often
complex, potentially conflicted, and expensive. The advent of
computerized financial advice offers huge promise to make
accessible a more coherent approach to financial management, one
that takes into account not only clients' financial assets but also
human capital, home values, and retirement pensions. Robo-advisors,
or automated on-line services that use computer algorithms to
provide financial advice and manage customers' investment
portfolios, have the potential to transform retirement systems and
peoples' approach to retirement planning. This volume offers
cutting-edge research and recommendations regarding the impact of
financial technology, or FinTech, to disrupt retirement planning
and retirement system design.
Financial market developments over the past decade have undermined
what was once thought to be conventional wisdom about saving,
investment, and retirement spending. How Persistent Low Returns
Will Shape Saving and Retirement explores how the weak capital
market performance predicted for the next several years will shape
pension saving, investment, and decumulation plans. Academics,
policymakers, and industry leaders debate alternative strategies to
cope with these challenges globally, as economic growth remains
slow and low returns become the 'new normal.' This volume includes
contributions from plan sponsors, benefit specialists, actuaries,
academics, regulators, and others working to design resilient
pensions for the next decades. Together, they identify several new
tools for retirement savers and pension managers.
As the world's population lives longer, it will become increasingly
important for plan sponsors, retirement advisors, regulators, and
financial firms to focus closely on how older persons fare in the
face of rising difficulties with cognition and financial
management. This book offers state-of-the-art research and
recommendations on how to evaluate when older persons need
financial advice, help them make better financial decisions, and to
identify policy options for handling these individual and social
challenges efficiently and fairly. This latest volume in the
Pension Research Council series, draws lessons from theory and
practice, and will be of interest to employees and retirees,
consumers and researchers, and financial institutions working to
design better retirement plan offerings.
The market for retirement financial advice has never been more
important and yet more in flux. The long-term shift away from
traditional defined benefit pensions toward defined contribution
personal accounts requires all of us to be more sophisticated today
than ever before. However, the landscape for financial advice is
changing all over the world, with new rules and regulations
transforming the financial advice profession. This volume explores
the market for retirement financial advice, to explain what
financial advisors do and how to measure performance and impact.
Who are these professionals and what standards must they abide by?
How do they make money and what are their incentives? How can one
protect clients from bad advice, and what is good advice? Does
advice alone effect changes in personal habits? Answering these
questions, along with new technology that will decrease the
delivery costs of advice, will play a transformative role in
helping more households receive the quality financial advice that
they need. Accordingly, this volume illuminates the market and
regulatory challenges so as to enhance consumer, plan sponsor, and
regulator decisions.
The worldwide financial crisis has wrought deep changes in capital
and labor markets, old-age retirement systems, and household
retirement and consumption patterns. Confidence has been shaken in
both the traditional defined benefit and defined contribution
plans. Around the world, plan sponsors, fiduciaries, policymakers,
and households have gained a new awareness of retirement risk. When
pressed to reform post-crisis, many would recommend enhancing
financial advice for plan participants, emphasizing flexibility and
the positive effect of working another one or two years to make up
for investment losses in the downturn. Adding to this is the
continuing need for financial education, essential as the
retirement system moves increasingly toward personal account
pensions. Perhaps most important of all is the need for greater
understanding of risk throughout the retirement security system,
along with new approaches to re-engineering retirement pensions.
This volume explores the lessons to be learnt for retirement
planning and long-term financial security in view of the massive
shocks to stock markets, labour markets, and pension plans
resulting from the financial crisis. It aims to rethink retirement
in the new economic era, including the resilience of defined
contribution plans and how defined benefit plans reacted to the
financial crisis.
Retirement risk management must be dramatically overhauled if
workers and retirees are to better prepare themselves to meet
future retirement challenges. Recent economic events including the
global financial crisis have upended expectations about what
pension and endowment fund managers can do. Employers and employees
have found it difficult to make pension contributions, despite
drops in retirement plan funding. In many countries, government
social security systems are also facing insolvency. These factors,
coupled with an aging population and rising longevity, are giving
rise to serious questions about the future of retirement in America
and around the world. This volume explores how workers and firms
can reassess the risks associated with retirement saving and
dissaving, to identify creative adjustments to adapt to these new
risks and realities. One area explored is the key role for
financial literacy and education programs. In addition, those
acting as plan sponsors and fiduciaries must reconsider pension
design to help them better address the new realities. Also novel
financial products are described that can help with the design of
retirement plans. Experts provide new research and offer policy
recommendations, illustrating how retirement plans can be amended
to better meet the retirement needs of workers and firms. This
volume is an important addition to the Pensions Research Council /
Oxford Univeristy Press series and to the current debate on
retirement security.
Annuity insurance products help protect retirees against outliving
their incomes. Dramatic advances in life expectancy mean that
today's retirees must plan on living into their eighties, their
nineties, and even beyond. Longer life expectancies are the symbol
of a prosperous society, but this progress also means that some
retirees will need to plan conservatively and cut back
substantially on their living standards or risk living so long that
they exhaust their resources. This book examines the role that life
annuities can play in helping people protect themselves against
such outcomes. A life annuity is an insurance product that pays out
a periodic amount for as long as the annuitant is alive, in
exchange for a premium. The book begins with a history of life
annuity markets during the twentieth century in the United States
and elsewhere. It then explores recent trends in annuity pricing
and money's worth, as well as the economic value generated for
purchasers of these products. The book explains the potential
importance of inflation-protected annuities and stock-market-linked
variable annuities in providing more complete retirement security.
The concluding chapters examine life annuities in various
institutional settings and the tax treatment of annuity products.
In the wake of the worst financial crisis since the Great
Depression, lawmakers and regulators around the world have changed
the playbook for how banks and other financial institutions must
manage their risks and report their activities. The US Congress
passed the Dodd-Frank Wall Street Reform and Consumer Protection
Act, and the European System of Financial Supervision (ESFS) is
also crafting a framework to supervise regulated financial sector
institutions including banks, insurers, pension funds, and asset
managers. The implosion of the financial sector has also prompted
calls for accounting changes from those seeking to better
understand how assets and liabilities are reported. Initially banks
were seen by many as the most important focus for regulatory
reform, but other institutions are now attracting policymaker
attention. There is logic to this in terms of managing systemic
risk and ensuring a level playing field that avoids arbitrage
between institutional structures. Yet the nature of pension and
insurer liabilities is so different from that of bank liabilities
that careful attention is needed in drafting appropriate rules. The
new rules are having both direct and spill-over effects on
retirement systems around the world. The first half of this volume
undertakes an assessment of how global responses to the financial
crisis are potentially altering how insurers, pension plan
sponsors, and policymakers will manage risk in the decades to come.
The second half evaluates developments in retirement saving and
retirement products, to determine which and how these might help
meet shortfalls in retirement provision.
As financial markets grow ever more complex and integrated,
households must make increasingly sophisticated and all-too-often
irreversible economic decisions. This is particularly evident in
retirement decision-making. Traditional defined benefit pension
schemes are being replaced with defined contribution pensions;
employer and government judgment regarding how much to save and
where to invest has been replaced by employees having to make these
choices on their own (sometimes assisted by advisers); and retirees
have become responsible for managing their own pension assets.
This volume explores how financial literacy can enhance peoples'
ability to make informed economic choices. It proposes that
financial literacy determines how well people make and execute
saving, investing, borrowing, and planning decisions. It examines
causality using controlled settings to disentangle whether
financial literacy causes saving or vice versa, and demonstrates
that financial education programs do indeed enhance financial
decision-making and asset accumulation.
Interest in longevity and longevity risk management is burgeoning,
as government and regulatory agencies are increasingly conscious of
the potential risks and benefits of longer lifespans. Commercial
and industrial organizations, especially within the financial
sector, are awakening to the opportunities presented by population
aging, along with the new array of financial insurance instruments
to manage longevity risk, which more sophisticated markets are
making possible. This volume explores three main themes: the need
for products to manage longevity risk; the structure and safety of
financial products on the market that help manage longevity risk;
and the role of policy in stimulating and strengthening longevity
insurance products.
This edited volume brings together leading international experts to
evaluate the challenge posed by trends in longevity risk and draws
out the implications and constraints of this new reality for
insurance companies and annuity providers. It discusses both
emerging economies (India, Chile) and many of the older nations
(Sweden, Canada, the US, Australia, Japan, the UK and Switzerland).
It aims to instigate new thinking among retirement planners, plan
sponsors, academics, and industry leaders seeking to manage
retirement payouts and longevity risk.
As the leading edge of the 'Baby Boom' generation attains age 60,
members of this unusually large cohort born 1946-66 are poised to
redefine retirement - just as they have restructured educational,
housing, and labor markets in prior days. Looking ahead, their
numbers and energy are sure to have a major impact on national
pensions, healthcare, and social safety nets. Contributors to this
volume note that 'Boomers' will be better off than their
predecessors in many ways, having benefited from the long run-up in
housing prices, dramatic improvements in healthcare, and the
expanding economy. On the other hand, the generation's sheer size
will surely squeeze resources and require new approaches to
retirement risk management. This volume paints a complex and
fascinating picture as Boomers move into retirement. On average
they are in better financial and physical health than prior
cohorts, and they can be anticipated to fare better than current
retirees in absolute terms. Yet the distribution of retiree income
and wealth will be less equal than in earlier years, and in
relative terms, many Boomers will be less well off than their
forebears. Contributors to the volume use many invaluable models
and datasets, including the incomparable Health and Retirement
Study (HRS) which affords unique insights into the status of mature
adults surveyed at the same age and hence same point in their life
cycles, but at three different time periods. Analysts offer new
evidence about prospects for health and income during retirement,
as well as pensions and housing equity, health, portfolio
allocation, and financial literacy. This book offers readers an
invaluable and first book-length study of Boomers as they march
into retirement. As such, it represents an invaluable addition to
the Pension Research Council/Oxford University Press series. It
will be especially useful for scholars and policymakers seeking to
understand retirement preparedness, to actuaries and tax
specialists concerned with retirement system regulation, and to
plan sponsors interested in the determinants of work and retirement
at older ages.
This book posits that retirement security is the central policy
concern of our time. A generation of 'Baby Boomers' is on the verge
of retirement, yet pension systems confront crushing challenges,
and governments often appear confused about which direction they
should move in. Contributors to this volume clarify the discussion
by addressing the question: 'What are the new risks and rewards in
pensions, and what paths can stakeholders chose to solve these
problems?'. The chapters set their sights on employees' needs and
expectations, employers' intentions and realizations, and
policymakers' efforts to resolve the many challenges. Despite the
fact that retirement systems face deep stresses exacerbated by
volatile capital markets, poor corporate earning streams, weak
macroeconomic performance, and international turmoil, nevertheless,
contributors in this volume show courage and creativity in plotting
the course over uneven terrain. In the book, three aspects of the
evolution of risk and reward-sharing in retirement are evaluated,
to offer guidance to pension fiduciaries, plan participants, and
policymakers. First, it formulates new perspectives for assessing
retirement risks and rewards. Second, it evaluates efforts to
insure retirement plans. Third, it proposes several new strategies
for managing retirement system risk. The volume represents an
invaluable addition to the Pension Research Council/Oxford
University Press series. It will be especially useful for managers
working toward more efficient pension plans; to scholars and
policymakers seeking to maximize pension design effectiveness; and
to actuaries and tax specialists concerned with pension regulation.
The Pension Research Council at the Wharton School of the
University of Pennsylvania was founded 50 years ago to encourage
research and teaching on pensions and retirement security. Council
projects address the long-term issues that underlie contemporary
concerns and seek to broaden public understanding of these complex
arrangements through research into their social, economic, legal,
actuarial, and financial foundations of privately and
publicly-provided benefits.
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