288 research outputs found

    How Poor are the Old? A Survey of Evidence from 44 Countries

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    This paper surveys 11 international comparative studies of poverty, income distribution and the elderly. Although it focuses on OECD economies, some 44 countries are covered. The paper addresses a series of questions. What level are the incomes of the elderly relative to the population as a whole? How has this changed over the past two decades? How many of the old are poor? How many of the poor are old? Are the oldest old poorer than younger pensioners? How do widows fare? What is the mix between public and private sources of income? Do the elderly poor remain poor? There is also a discussion of methodological issues. The results show that the incomes of the elderly are typically around 80 per cent of incomes of the populations as a whole. In most countries, this ratio has been increasing over the past two decades. Although there remain pockets of poverty among the elderly, most studies show that the old are represented proportionally or under-represented among the poor.pensions; incoem distribution

    The tax treatment of funded pensions

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    This report makes an international comparison of the tax treatment of funded pensions and finds that the expenditure-tax system is the best way of taxing pensions because it does not distort the decision whether to consume now or save and consume in the future, unlike the comprehensive income tax; rather it taxes pensions once: either when contributions are made or when benefits are withdrawn. Moreover, it is easy to administer and the tax burden does not vary arbitrarily with inflation. The report also finds that in the context of the design and implementation of a pension reform, it is important to take the cost of tax relief, measured by tax expenditures, into account. The report is structured as follows: Section 1 considers a number of different ways to tax pensions. Section 2 describes the tax treatment of pensions in a range of countries. Section 3 extends the analysis to compute a summary measure of the generosity of tax incentives. Section 4 considers the link between the taxation of pension funds and the tax treatment of the underlying assets in which they invest. Section 5 examines the deductibility of contributions. Sections 6 and 7 look at the importance of pension funds and associated tax incentives in the aggregate. Section 8 assesses the objectives for taxing pensions, the options, and the arguments while section 9 concludes.Economic Theory&Research,Banks&Banking Reform,Public Sector Economics,Pensions&Retirement Systems,Environmental Economics&Policies

    Cross-country comparisons of pensioners’ incomes

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    This report surveys a dozen international comparative studies of poverty, income distribution and the elderly in OECD countries. It updates a previous Department of Social Security report — Whiteford and Kennedy, 1995, based on data from the mid- to late-1980s — including information up to the mid-1990s. The report addresses a series of questions. What level are the incomes of the elderly relative to the population as a whole? How has this changed over the past two decades? How many of the old are poor? How many of the poor are old? Are the oldest of the old poorer than younger pensioners are? How do widows fare? What is the mix between public and private sources of income? Do the elderly poor remain poor? There is also a discussion of methodological issues. The results show that the incomes of the elderly are typically around 80 per cent of incomes of the populations as a whole. In most countries, this ratio has been increasing over the past two decades. Although there remain pockets of poverty among the elderly, most studies show that the old are represented proportionally or under-represented among the poor. The papers present conflicting pictures of the position of the United Kingdom. There is, however, no consistent evidence that pensioners in the United Kingdom are better or worse off than their counterparts overseas.pensions; retirement; old-age; income; income distribution; poverty;

    The Role of Choice in the Transition to a Funded Pension System

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    A critical question in the transition to a funded, private pension system is whether the new private element is presented as a mandate or choice to current and future workers. This paper sets out the spectrum of available options and looks at policy in 13 reforming countries. It concludes that older workers are best excluded from reform, because the economic benefits are small and the political resistance is likely to be large if they are included. However, a defined cut-off age is arbitrary for reasons of intergenerational equity and heterogeneity of portfolio composition and risk preferences within cohorts. A voluntary switch is preferred. The main objection is the resulting uncertainty over the numbers switching. Analysis of reforming countries shows however, a consistent and rational pattern of switching. The paper concludes by discussing policy options for managing the switching process.pensions; funding; pay-as-you-go

    Changing tax for the self-employed

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    The government’s overhaul of the direct tax system, including the 1984 reforms to the Corporation Tax, the introduction of Independent Taxation and in 1993, the introduction of ‘pay and file’ for companies, has so far left the taxation of the self-employed relatively untouched. Despite many criticisms of the system, including more recently the Keith Committee report (1983) and the Public Accounts Committee of the House of Commons (1976), it is only now that the government has considered reforming the income tax system as it relates to the self-employed, with the publication of a consultative document, A Simpler System for Taxing the Self-Employed, (Inland Revenue, 1991a). At the heart of the proposals is reform of the ‘preceding year basis of assessment’ (PY basis), introduced by Winston Churchill in 1926, itself then billed as a ‘simplification’ of the system.

    The economic well-being of older people in international perspective: a critical review

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    This paper surveys a dozen international comparative studies of poverty, income distribution and older people in industrialized countries using data up to the mid-1990s. It addresses a series of questions. At what level are the incomes of the elderly relative to the population as a whole? How has this changed over the past two decades? How many of the old are poor? How many of the poor are old? Are the oldest of the old poorer than younger pensioners are? The results show that the incomes of older people are typically around 80 per cent of incomes of the whole population. This ratio has been increasing over the past two decades in most countries. Although there remain pockets of poverty among the elderly, the old are generally represented proportionally or under-represented among the poor.pension; retirement; income distribution

    Pension plans and retirement incentives

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    The object of this paper is to examine the impact of type of pension scheme on retirement behaviour. The well-documented decline in the labour-force participation of older women and older men (in particular) is common to most industrialised countries. The proportion of men aged 55 to 64 in employment fell between 1980 and 1996 in all 17 OECD countries for which data are available, by an average of more than ten percentage points. The average employment rate of men in this age group in 1996 was a little under 60 per cent. The reasons for this are complex, but probably involve both a demand effect — high and persistent unemployment, especially in Europe — and a supply effect — pension benefits and the value of other savings have increased. It is desirable to encourage people to retire later to counterbalance the effect of population ageing on the ratio of workers to dependants. Some have argued that this can be achieved with ‘parametric reforms’, tinkering with the rules of existing public defined-benefit schemes. Many countries, however, have introduced or proposed more radical reforms emphasising the role of privately managed defined-contribution pensions. An obvious question is how these regimes are likely to affect retirement behaviour. The paper presents a model of a simple (defined contribution) pension plan and looks at the optimal retirement date, which is found to depend on prospective earnings and the evolution of the accumulated pension fund, which, in principle, are separable. The paper also looks at defined-benefit pension schemes, which are the norm in public and much private provision. Here there are significant interactions and complications. The pension formula is often non-linear, with accrual rates that vary with the number of years of contributions and formulae that depend on a limited number of ‘best’ or ‘final’ years of earnings. There are also ‘spikes’ when early retirement is first permitted, at the standard retirement age etc. Pensions can be actuarially adjusted, depending on the year at which benefits are first drawn. We show that the incentives in a defined-benefit scheme are very different from the defined-contribution retirement saving plan.pensions; retirement

    Civil-service pension schemes around the world

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    There are separate pension schemes for civil servants (and often for other public-sector workers) in about half of the world’s countries, including some of the largest developing economies, such as Brazil, China and India. In the higher-income, OECD countries, spending on pensions for public-sector workers makes up one quarter of total pension spending. In less developed countries, this proportion is usually higher. Yet, very little has been written on the design and reform of civil-service pension plans, especially when compared with the voluminous literature on national pension programs. This paper provides the first, detailed cross-country comparison of the terms and conditions of national and public-sector pension schemes. Civil-service schemes are typically more generous than national pension programs. Analysis of current pension spending shows that pensions for public-sector workers are a bigger burden on the government budget in developing countries than they are in higher-income economies.pensions; civil service; retirement

    Pensions at a glance: public policies across OECD countries

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    Reforming pensions is one of the biggest challenges of the century. All OECD countries have to adjust to the ageing of their populations and re-balance retirement income provision to keep it adequate and ensure that the retirement income system is financially sustainable. Demographers have been warning us for some time that ageing is looming and that when it strikes populations and workforces will rapidly age. But many governments preferred to ignore the call for reform and cling to the hope of postponing solutions beyond the next election or claiming that rather painless remedies could be found. Immigration of younger workers, more women in work and higher productivity were put forward in the hope that more painful solutions could be avoided. All of these factors can certainly help to cope with ageing and especially with the financing of pensions but the increases necessary to compensate for ageing are so large that one cannot rely on them alone. Most OECD countries have realised this and have undertaken numerous reforms during past years. But pension reform is a difficult task. It involves long-term policy decisions under uncertain conditions and often the likely impact of these decisions on the well-being of pensioners is not spelt out clearly. More than most other areas, pension reform is a highly sensitive topic. Not only does it lead to heated ideological debates, but it makes people protest in the streets, and even forces governments to retreat from needed reforms. As people working on pension reforms around the world, we at the OECD Secretariat are asked time and again for the “right” solution to the problem. Which country does it the best way, which country is doing the worst job, which systems are the most generous, will it be possible to reform without increasing pensioner poverty, and will countries be able to pay for the promises they are making? There are no simple answers to these questions. National retirement-income systems are complex and pension benefits depend on a wide range of factors. Differences in retirement ages, benefit calculation methods and adjustment of paid-out pensions make it very difficult to compare pension policies across countries. Another problem is that life expectancies at retirement differ from one country to another, which means that some countries will have to pay pensions for a much longer period of retirement than others. As a result national debates are often full of misleading claims regarding the generosity and affordability of other countries’ pension arrangements. International comparisons to date have focussed mostly on the fiscal aspects of the ageing problem. But much less attention has been paid to the social sustainability of pension systems and the impact of reforms on the adequacy and distribution of pensioner incomes. But these aspects are also crucial if countries want to attain the dual objective of promising affordable pensions and preventing a resurgence of pensioner poverty. This report presents the first direct comparison of pension promises across OECD countries. It provides a novel framework to assess the future impact of today’s pension policies, including their economic and social objectives. It takes account of the detailed rules of pension systems but summarises them in measures that are easy to compare. Pension benefits are projected for workers at different levels of earnings, covering all mandatory sources of retirement income for private-sector workers, including minimum pensions, basic and means-tested schemes, earnings-related programmes and defined contribution schemes. Another novelty is the inclusion of the large effects of the personal income tax and social security contributions on living standards in work and in retirement: all indicators are presented gross and net of taxes and contributions. The framework can be used in different ways. As it is flexible to changing assumptions, the impact of policy reforms and economic developments on pension entitlements can be simulated. It can provide answers to questions such as what would happen if a country switched from wage to price indexation of pensions, or changed the benefit accrual rate. It can also inform on the impact of changes in economic growth, interest rates, wage growth or inflation on pensions of future retirees. The OECD will use the framework to monitor pension reforms in member countries by updating this report regularly. This report is the first in a biennial series which will be produced in co-operation with the European Commission. Public opinion on pensions is changing. People are realising that a shrinking number of young workers will have trouble paying for more and more pensioners. Time has come to open a frank debate among all members of society and address the question of how the cost of ageing should be distributed in each society. Our publication aims to contribute to this debate by shedding more light on the social and economic implications of pension reform.pensions; retirement; ageing

    The role of choice in the transition to a funded pension system

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    A critical question in the transition to a funded, private pension system is whether the new private element is presented as a mandate or choice to current and future workers. This report sets out the spectrum of available options and looks at policy in 13 reforming countries-Argentina, Bolivia, Chile, Colombia, El Salvador, Mexico, Peru, Uruguay, Croatia, Hungary, Kazakhstan, Poland, and the United Kingdom. It concludes that older workers are best excluded from reform because the economic benefits are small and the political resistance is likely to be large if they are included. However, a defined cut-off age is arbitrary for reasons of intergenerational equity and heterogeneity of portfolio composition and risk preferences within cohorts. A voluntary switch is preferred. The main objection is the resulting uncertainty over the numbers switching. Analysis of reforming countries shows, however, a consistent and rational pattern of switching. The paper concludes by discussing policy options for managing the switching process.Non Bank Financial Institutions,Banks&Banking Reform,Pensions&Retirement Systems,Environmental Economics&Policies,Economic Theory&Research
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