A macro‐financial analysis of pension system reforms in emerging Europe: The performance of IRAs and policy lessons for Serbia

The article explores the initial macro‐financial performance of partial pension system “privatizations”— involving privately‐managed individual retirement savings accounts (IRAs) — undertaken in many emerging European countries. Using empirical data for a period of close to a decade, the evidence shows that returns on privately‐managed IRAs have been below the implicit rate of return of public pay‐as‐you‐go (PAYG) systems. High operating costs and undeveloped capital markets are identified as major contributing factors to the failure of privately‐managed IRAs to meet reform expectations. In light of empirical evidence, Serbia is advised to focus on parametric PAYG reforms and to avoid reforms that involve the partial “privatization” of the pension system.     

Can complementary pension plans help improve retirement income in the Dominican Republic?

In the 1990s, following the earlier example of Chile, pension system reforms were implemented in a number of Latin American and other countries. These reforms focused on introducing models of pension provision that were fully‐funded and privately managed. Although aspects of these reforms have been positive, for many persons covered by these systems retirement income is not adequate. The development of occupational pension plans may offer an alternative, complementary mechanism to help improve pension adequacy. This article discusses different complementary pension plan models and examines the case of the Dominican Republic. It argues that complementary occupational pension plans may be a viable policy option for this developing country.     

Social security for China's rural aged: a proposal based on a universal non‐contributory pension

Yang Y, Williamson JB, Shen C. Social security for China's rural aged: a proposal based on a universal non‐contributory pension Int J Soc Welfare 2010: 19: 236–245 © 2009 The Author(s), Journal compilation © 2009 Blackwell Publishing Ltd and the International Journal of Social Welfare. China's relative lack of social security coverage for rural elders exacerbates the already severe rural–urban economic disparity, slows the rate of rural poverty reduction, and raises social justice concerns. Our analysis draws on evidence from a number of sources including interviews with experts on China, Chinese government documents, Chinese newspaper accounts, and other sources from other countries. Based on our analysis of what has been tried in other countries and the current situation in rural China, we offer some suggestions for Chinese policy makers. We suggest that, for rural China, a universal non‐contributory old‐age pension deserves serious consideration, and refer to our proposed model as a Rural Old‐Age Social Pension. It will reduce the level of poverty in rural areas and the degree of income inequality between rural and urban areas while simultaneously promoting social and political stability.     

Public pension institutions and old‐age mortality in a comparative perspective

Norström T, Palme J. Public pension institutions and old‐age mortality in a comparative perspective Int J Soc Welfare 2010: ??: ??–??© 2010 The Author(s), Journal compilation © 2010 Blackwell Publishing Ltd and International Journal of Social Welfare. The aim of the study was to estimate the impact of changes in pension rights on old‐age mortality. We made a distinction between two dimensions of pension benefits, one of providing basic security (BASIC), and the other of providing income security (INCOME). Analyses were based on data for 18 OECD countries during the post‐war period. The outcome comprised old‐age excess mortality, defined as the ratio of the mortality rate 65+ to the mortality rate in the age group 30–59 years. The latter was regarded as a proxy for unobserved factors potentially related to old‐age mortality as well as pension rights. The pooled cross‐sectional time series data were analysed through fixed effects modelling. The results suggest that BASIC (but not INCOME) has a beneficial impact on old‐age excess mortality, which was statistically significant. We interpret the results in terms of the poverty‐reducing effects of pension entitlements with a basic security orientation.     

Pension privatization in crisis: Death or rebirth of a global policy trend?

From 1981 to 2007, more than thirty countries worldwide fully or partially replaced their pre‐existing pay‐as‐you‐go pension systems with ones based on individual, private savings accounts in a process often labelled “pension privatization”. After the global financial crisis, this trend was put on hold for economic, ideational, and institutional reasons, despite a rise in critical indebtedness that has facilitated pension privatization in the past. Is the global trend towards pension privatization dead or in the process of being reborn, perhaps in a somewhat different form? Several recent trends point to rebirth as policy‐makers scale back public and private pension systems, attend to minimum pensions and “nudge” rather than mandate people to save for retirement.     

Developing countries and systemic pension reforms: Reflections on some emerging problems

Since 1981 close to forty countries have introduced systemic pension reforms that have replaced all or part of prior pay‐as‐you‐go (PAYG) schemes with privately managed funded defined contribution (FDC) pillars or systems. However, over the past decade about half of these countries have subsequently cutback on, or entirely eliminated, these FDC schemes. In this article we explore some of the reasons why this reversal is often taking place in developing countries. As part of our analysis we propose a new pension reform typology that goes beyond the commonly used dichotomy between PAYG and pension privatization. We identify and discuss four factors that are of particular relevance to those seeking to understand the pension policy reversals that have been taking place in many developing countries: low pension coverage and incentive incompatibility, triple burden costs, tradeoffs between pension reforms and social pensions, and difficulties with annuitization.     

Second‐pillar pensions in Central and Eastern Europe: Payment constraints and exit options

During 1998–2007, a majority of Central and Eastern European (CEE) governments enacted laws obligating workers to save for retirement in privately managed individual accounts. The governments funded these accounts with a portion of public pension revenues, thus creating or increasing deficits in public systems. After the onset of the global financial and economic crisis (2008), most CEE governments reduced these funding diversions and scaled back the accounts. Now, a decade after the crisis, this article examines the benefits that the accounts are beginning to pay retiring workers. In general, these benefits are shown to be disadvantageous compared with public pensions. Some pay lump sums in lieu of regular monthly benefits, most fail to adjust pensions regularly for inflation, and some pay women less than men with equal account balances. In several countries, pensioners with individual accounts receive lower benefits than those without them. To enable retiring workers to avoid these disadvantages, several CEE governments have allowed them to refund their account balances and receive full public pensions. Yet while this strategy diffuses worker dissatisfaction, it also places strains on public pension finance. To assist second‐pillar account holders without weakening public pensions, governments should consider making private pension savings voluntary and financing these schemes independently of public pensions – i.e. by worker and employer contributions and, possibly, direct state support.     

Do public pensions matter for health and wellbeing among retired persons? Basic and income security pensions across 13 Western European countries

Esser I, Palme J. Do public pensions matter for health and wellbeing among retired persons? Basic and income security pensions across 13 Western European countries Int J Soc Welfare 2010: ??: ??–??© 2010 The Author(s), Journal compilation © 2010 Blackwell Publishing Ltd and International Journal of Social Welfare. Mortality rates suggest that elderly people in the advanced welfare democracies have experienced dramatically improved health over the past decades. This study examined the importance of public pensions for self‐reported health and wellbeing among retired persons in 13 Organisation for Economic Cooperation and Development countries in 2002–2005. New public pension data make it possible to distinguish between two qualities of pension systems: ‘basic security’ for those who have no or a short work history, and ‘income security’ for those with a more extensive contribution record. For enhanced cross‐national comparison, relative measures of ill‐health and wellbeing were constructed to account for cultural bias in responses to survey questions and heterogeneity among countries in the general level of population health. Overall, better health is found in countries with more generous pensions, although the results are gendered; for women's health, high basic security of the pension system appears to be particularly important. Women's wellbeing also tends to be more dependent on the quality of basic security.     

Implicit debt in public‐sector pension plans: An international comparison

Most countries have separate pension plans for public‐sector employees. The future fiscal burden of these plans can be substantial as the government usually is the largest employer, pension promises in the public sector tend to be relatively generous, and future payments have to be paid out directly from government revenues (pay‐as‐you‐go) or by funded plans (pension funds) which tend to be underfunded. The valuation and disclosure of these promises in some countries lacks transparency, which may hide potentially huge fiscal liabilities to be passed on to future generations of workers. In order to arrive at a fair comparison between countries regarding the fiscal burden of their public‐sector pension plans, this article recommends that unfunded pension liabilities should be measured and reported according to a standard approach for reasons of fiscal transparency and better policy‐making. From a sample of Member countries of the Organisation for Economic Co‐operation and Development, the size of the net unfunded liabilities as of the end of 2008 is estimated in fair value terms. This fiscal burden can also be interpreted as the implicit pension debt in fair value terms.     

Pension scheme fees and charge ratios in 44 countries: A comparative study

Based on data received from pension supervisory authorities, the article reviews 85 different pension schemes in 44 jurisdictions by looking at fees and charges as well as their legal ceilings and their development since 2014. A key finding is the observed decrease in fees and caps. The article presents jurisdictions according to clusters, i.e. by groups of countries with identical or very similar items already covered by pension fees, and analyses the extent to which various cost and fee elements are covered by fees charged to members. Finally, we calculate charge ratios for each cluster to quantify the impact of fees and charges on pension savings. Occupational defined contribution pension schemes and personal plans linked to employment tend to be much more cost effective than personal schemes that have no direct employment link.     

The retrenchment of second‐tier pensions in Hungary and Poland: A precautionary tale

In 1997, Hungary and Poland led Central Europe in partially privatizing their national pension systems, diverting a portion of public pension contributions to privately‐managed individual investment accounts. In the aftermath of the global economic crisis, both governments retrenched these second‐tier schemes: Hungary (December 2010), by ceasing to fund the accounts and recouping most workers' existing balances; and Poland (April 2011), by reducing the diversion of contributions to the second tier. The factors that drove these retrenchments are traced to the original 1997 second‐tier designs, which omitted key specifications related to financing the accounts, private benefit design, and the regulation of private management fees. While both governments tried to compensate for the missing design specifications during implementation, the results were limited. By reducing investment returns and raising borrowing costs, the global economic crisis brought the problems to a head. The conclusion highlights some outstanding issues whose resolution will shape the retrenchments' long‐term impacts.     

The potential power of social policy programmes: income redistribution,economic resources and health

Lundberg O, Fritzell J, Åberg Yngwe M, Kölegård ML. The potential power of social policy programmes: income redistribution, economic resources and health Int J Soc Welfare 2010: ??: ??–??© 2010 The Author(s), Journal compilation © 2010 Blackwell Publishing Ltd and International Journal of Social Welfare. This Supplement includes a number of articles dealing with the role of social policy schemes for public health across the life course. As a key social determinant of health, poverty and its consequences have historically been at the forefront of the public health discussion. But also in rich countries today, economic resources are likely to be important for health and survival, both on an individual and an aggregate level. This introductory article serves as a background for the more specific analyses that follow. The focus is on why income and income inequality could have an effect on individual and population health. We discuss relationships between the individual and population levels and between income and health, and some of the possible mechanisms involved. We also present arguments for why welfare state institutions may matter.     

Social assistance and minimum income benefits in old and new EU democracies

Nelson K. Social assistance and minimum income benefits in old and new EU democracies Int J Soc Welfare 2010: 19: 367–378 © 2009 The Author, Journal compilation © 2009 Blackwell Publishing Ltd and the International Journal of Social Welfare. In this article, social assistance developments are analysed in a large number of European Union (EU) member states, including European transition countries and the new democracies of southern Europe. The empirical analysis is based on the unique and recently established SaMip Dataset, which provides social assistance benefit levels for 27 countries from 1990 to 2005. It is shown that social assistance benefits have had a less favourable development than that of unemployment provision. Hardly any of the investigated countries provide social assistance benefits above the EU near‐poverty threshold. Social assistance benefit levels have not converged in Europe. Instead, divergence can be observed, which is due mainly to lagging developments in eastern and southern Europe.     

Prevalence of gambling problems among adolescents in the Nordic countries: an overview of national gambling surveys 1997–2009

Kristiansen S, Jensen SM. Prevalence of gambling problems among adolescents in the Nordic countries: an overview of national gambling surveys 1997–2009 Int J Soc Welfare 2011: 20: 75–86 © 2009 The Author(s), Journal compilation © 2009 Blackwell Publishing Ltd and the International Journal of Social Welfare. The study presents an overview of prevalence studies focusing on problem and pathological gambling among adolescent populations in the Nordic countries. Past‐year prevalence of problem gambling among adolescents in the Nordic countries ranges from 0.4 per cent (Denmark) to 4.2 per cent (Sweden). Past‐year prevalence of pathological gambling ranges from 0.1 per cent (Denmark) to 1.76 per cent (Norway). Results from the Nordic countries also show that boys gamble more than girls, older adolescents gamble more than younger adolescents and that, as shown in adult prevalence surveys, problem gambling is more widespread among adolescents than among adults. It is concluded that investigations of gambling problems among adolescents in the Nordic countries differ regarding age groups, sampling procedures, response rates, nomenclature and screening instruments, all of which complicates valid comparisons. More collaboration between researchers from different countries is urged in order to improve comparability between national studies.     

What works best when? The role of active labour market policy programmes in different business cycles

Nordlund M. What works best when? The role of active labour market policy programmes in different business cycles Int J Soc Welfare 2011: 20: 43–54 © 2009 The Author, Journal compilation © 2009 Blackwell Publishing Ltd and the International Journal of Social Welfare. At what point in a business cycle do long‐term unemployed persons gain most from participation in active labour market policy programmes (ALMP) as compared with openly unemployed persons? This article studies this question from the perspective of individual human capital with the hazard of labour market exit and chances of future labour market stability and equal post‐unemployment income as output variables. All the long‐term unemployed in Sweden were followed on a four‐year basis, with 1993 (recession) and 1999 (boom) as starting years. The study shows mainly positive effects among participants regardless of the state of the market. However, ALMP training has a ‘bridging’ effect over different labour market conditions, and a quick return to the regular labour market is, therefore, not as important for the success of participation as it is among ALMP employment participants.     

Determinants of welfare service provision after the Golden Age

Jensen C. Determinants of welfare service provision after the Golden Age Int J Soc Welfare 2011: 20: 125–134 © 2009 The Author, International Journal of Social Welfare © 2009 Blackwell Publishing Ltd and the International Journal of Social Welfare. The welfare state literature exhibits a ‘transfer bias’ in the sense that very little research exists on welfare services or benefits in‐kind. This article presents one of the first systematic studies on the determinants of welfare service provision since the end of the Golden Age of welfare expansion. The article concludes that partisan factors do not drive change, although historically they may have been pivotal. Instead, new factors, including deindustrialisation, female labour force participation and rising public attention appear to be highly significant. It is argued that new studies need to take seriously both the individual characteristics of services as well as the changing social demands that the services are supposed to meet.     

Laws and policies to support the wellbeing of children: an international comparative analysis

Nicklett EJ, Perron BE. Laws and policies to support the wellbeing of children: an international comparative analysis Int J Soc Welfare 2010: 3–7 © 2009 The Author(s), Journal compilation © 2009 Blackwell Publishing Ltd and the International Journal of Social Welfare. The international community has raised concerns regarding the extent to which countries have implemented laws and policies to support the rights and wellbeing of children. This study evaluates the progress of least‐developed countries (LDCs) and middle‐income countries (MICs) in developing such legislation. Surveys were sent to 131 UNICEF country offices. Items included efforts to promote family preservation and family ties, family‐based care over institutionalization, and child participation in placement decisions. A total of 68 surveys were returned, reflecting a 52 percent response rate (LDC, n= 25; MIC, n= 43). Legislation that addressed abuse and neglect of children, maternity leave, removal of children from the family, family care, adoption, and guardianship was widespread. Chi‐square tests indicated that MICs had a substantially higher number of laws and policies related to child allowances, school feeding programs, maternity leave, and day care.     

Fulfilment of basic needs from a subjective point of view in rural Guatemala

Guardiola J, García‐Muñoz T. Fulfilment of basic needs from a subjective point of view in rural Guatemala Int J Soc Welfare 2011: 20: 393–403 © 2010 The Author(s), International Journal of Social Welfare © 2010 Blackwell Publishing Ltd and the International Journal of Social Welfare. The study of subjective wellbeing in developing countries is a relatively new field of research, but interest is increasing among researchers. A few decades ago, techniques such as the basic needs approach were applied in order to understand development. The basic needs framework has recently been used to define and monitor the Millennium Development Goals. However, it is limited when it comes to defining the content of basic needs and determining to what extent they are being satisfied, which leaves this decision to an external authority other than the individual. In this article, we estimated how certain indicators and assets have influenced the perception of basic needs in a rural area of Guatemala using a data set containing 369 interviews with Mayan households. The results allowed us to identify the characteristics or assets that influence the perception of basic needs, leaving the decision as to the Mayan people themselves as to whether their basic needs are being met.     

Promoting a higher retirement age: A prospect‐theoretical approach

Demographic ageing and the necessity of raising the retirement age is one of the most frequently debated topics among European welfare policy experts. This study used prospect theory as developed in behavioural economics to explain public attitudes towards pension reforms. It argues that, in line with prospect theory, negative incentives are more useful in changing people's attitudes in favour of a higher statutory retirement age than are positive incentives. Therefore, in the case of increasing life expectancy, defined‐contribution schemes that apply actuarial formulae linking the level of starting monthly pension benefits to life expectancy are more useful in promoting a higher retirement age than conventional defined‐benefit schemes, which typically do not forge an automatic connection between longevity and starting pensions. The implications of prospect theory for attitudes towards pension reforms were tested using Eurobarometer survey data collected in 2004 and 2009 in the Czech Republic, Poland and Slovakia.