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Pension policy design: The core issues

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  • Aaron George, Grech

Abstract

The last two decades have been characterised by significant changes in national pension arrangements. While at first, a consensus seemed to be evolving around a one-size-fits-all reform, more recently the trend has been towards a better customisation of reforms. This paper reviews this process, focusing on five pension policy design issues. These are how policymakers have sought to optimise poverty alleviation effectiveness; the redefinition of the state’s role in smoothing incomes over the life-course; the balancing of contributions to benefits; adjusting the system to be more responsive to demographic, economic and social changes; and ensuring that reforms will be long-lasting. While the role of state pensions still appears to be on a diminishing path, there has been a growing realisation of the need to ensure that they remain adequate. This has led to the setting up of innovative minimum pension schemes and credits for periods of childcare and unemployment. The expanding role of private pensions has also led governments to intervene more in their operation. Policymakers have shown strong interest in automatic adjustment mechanisms, to try to bring about required economic changes. However there is greater understanding that for the latter to happen, the state has to engage more with its citizens. While changes in pension systems can help societies respond to the ageing transition, for instance by removing incentives to retire too early or by aligning better the generosity of benefits to contributions made, there will need to be a much broader policy response.

Suggested Citation

  • Aaron George, Grech, 2014. "Pension policy design: The core issues," MPRA Paper 53662, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:53662
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    File URL: https://mpra.ub.uni-muenchen.de/53662/2/MPRA_paper_53662.pdf
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    References listed on IDEAS

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    1. Robert Holzmann & Richard Hinz, 2005. "Old Age Income Support in the 21st century: An International Perspective on Pension Systems and Reform," World Bank Publications, The World Bank, number 7336.
    2. Michael Fuchs & Aaron George Grech & Asghar Zaidi, 2006. "Pension Policy in EU25 and its Possible Impact on Elderly Poverty," CASE Papers case116, Centre for Analysis of Social Exclusion, LSE.
    3. Nicholas Barr & Peter Diamond, 2006. "The Economics of Pensions," Oxford Review of Economic Policy, Oxford University Press, vol. 22(1), pages 15-39, Spring.
    4. Grech, Aaron George, 2010. "Assessing the sustainability of pension reforms in Europe," LSE Research Online Documents on Economics 43865, London School of Economics and Political Science, LSE Library.
    5. Alain Jousten, 2007. "Public Pension Reform; A Primer," IMF Working Papers 07/28, International Monetary Fund.
    6. Grech, Aaron George, 2013. "How best to measure pension adequacy," LSE Research Online Documents on Economics 51270, London School of Economics and Political Science, LSE Library.
    7. Disney, Richard, 2000. "Crises in Public Pension Programmes in OECD: What Are the Reform Options?," Economic Journal, Royal Economic Society, vol. 110(461), pages 1-23, February.
    8. Monika Queisser & Edward R. Whitehouse, 2006. "Neutral or Fair?: Actuarial Concepts and Pension-System Design," OECD Social, Employment and Migration Working Papers 40, OECD Publishing.
    9. Grech, Aaron George, 2012. "Evaluating the possible impact of pension reforms on future living standards in Europe," MPRA Paper 39851, University Library of Munich, Germany.
    10. Barr, Nicholas & Diamond, Peter, 2008. "Reforming Pensions: Principles and Policy Choices," OUP Catalogue, Oxford University Press, number 9780195311303.
    11. Feldstein, Martin S, 1974. "Social Security, Induced Retirement, and Aggregate Capital Accumulation," Journal of Political Economy, University of Chicago Press, vol. 82(5), pages 905-926, Sept./Oct.
    12. Palacios, Robert & Sluchynsky, Oleksiy, 2006. "Social pensions Part I : their role in the overall pension system," Social Protection and Labor Policy and Technical Notes 36237, The World Bank.
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    More about this item

    Keywords

    Social Security and Public Pensions; Retirement; Poverty; Retirement Policies;

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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