Running off the £2 trillion of UK corporate sector defined benefit liabilities in an efficient and effective fashion is the biggest challenge facing the UK pensions industry. As more and more defined benefit pension schemes start maturing, the trustees running those schemes need to consider what their target end-state will be and the associated journey plan. However, too few trustee boards have well-articulated and robust plans. Determining the target end-state requires a grasp of various disciplines and an ability to work collaboratively with different professional advisers. This paper sets out issues trustees, employers and their advisers can consider when addressing whether their target end state should be low- dependency, buyout or transfer to a superfund. Member outcomes analysis is introduced as a central tool through which to differentiate alternative target end-states. A five-step methodology is set out for deriving an optimal target end-state for a scheme. Also considered are the specific factors impacting stressed schemes, which highlights the importance to trustee boards when considering their Plan B should their employer or scheme ever become stressed. The paper ends with specific recommendations for the actuarial profession and The Pensions Regulator to take forward.

In this paper, we provide an analysis of financial literacy in Peru and Uruguay. We find that the knowledge of simple concepts at the basis of financial decision-making is low in both countries. Not only is financial illiteracy widespread, but it is particularly acute among women, rural populations, the less educated, low-income people, the self-employed, the not employed, younger people (in the case of Peru), and older people (in the case of Uruguay). We also find that financial literacy is linked to measures of financial wellbeing: those who are financially literate are more likely to be able to save and plan for retirement in both countries. In addition, we find a relationship between knowledge of specific concepts and key financial behaviors. Lastly, we find a relationship between financial literacy and financial resilience

The replacement rate (RR) is a quintessential property of pension systems. Yet, current measures of the RR are plagued with problems. We argue that the concept of RR should be based on the replacement of lifetime permanent income rather than pre-retirement income, and we show that the self-financeable RR with respect to the permanent income has the advantage of being independent of labor income (wages and density of contributions). We define an RR measure, called CRR, as the country-level RR of the permanent labor income that the working-age population could buy with their mandatory pension deposits if they stay constant over time. Pension deposits refer to national mandatory contributions plus the fraction of non-contributory pensions whose financing could be attributed to the working-age population, all as a percentage of the gross domestic product. The CRR is easy to compute and interpret, is nationally representative, and provides an international ranking because it is independent of pension rules, GDP, intertemporal and intergenerational redistributions, and sustainability. The application of the CRR to most OECD countries using the available data shows a 65% average across them, with several countries achieving a 100% RR, all mostly due to their high mandatory contributions as a percentage of GDP.

Fertility, particularly at its current low level in many developed countries and high level in some less developed countries, is a key factor driving demographic, economic, and societal changes at local, national, and global levels. Population ageing due to low fertility and increasing longevity represents one of the most significant global megatrends and risks. Many countries are already experiencing population decline and rapid growth of their elderly populations, with implications for workforce size, economic development, health and pension schemes, and social security arrangements. Actuaries are well known for their work on mortality and morbidity, but they have rarely considered fertility and its proximate determinants, despite their demographic and economic effects. This paper explores key explanations and outcomes of past and projected future fertility trends, and the implications for actuaries and for political and economic decision-makers.

A growing scholarship has documented changes in welfare policy in twenty-first-century Latin America, but no study yet has offered a systematic assessment, using a welfare regime approach, that captures the main trends across countries and over time. For a sample of 17 countries, this study offers a comprehensive tool to measure shifts in social policy regimes, highlighting three dimensions of welfare – inclusion, generosity, and equity – across four policy areas: transfers, health care, education, and family policies. Countries made significant progress in generosity and inclusion, but none improved equity. A cluster analysis based on the three dimensions of welfare offers a new, more precise classification of Latin American countries in welfare regimes in 2002 and 2017. Although the analysis shows minor shifts in country groupings, an increasing reliance on social assistance policies, particularly among the most advanced countries, marks a shift towards what I call compensatory regimes.

Many international pension systems have undergone extensive changes over recent decades, associated with a dominant narrative of the need to respond to the pressures of population ageing. This has resulted in an increasing emphasis on curtailing the role of the state and promoting individual responsibility for pension saving. However, there is currently limited research which considers attitudes and expectations surrounding pension developments and, in particular, the role of state pensions. This is despite these factors influencing pension savings behaviour. Existing research suggests that under-saving is most common amongst women (linked to their more fragmented employment histories throughout the lifecourse) and millennials (born in the early 1980s up to the mid- to late 1990s), indicating the importance of better understanding their attitudes and expectations regarding pensions. This article aims to address this knowledge gap by exploring, in the United Kingdom, millennial women's knowledge, attitudes and expectations regarding state pensions, using 45 qualitative interviews and a focus group. The findings demonstrate that millennial women's situation regarding state pensions is characterised by a lack of knowledge, awareness and certainty, which influences their pensions behaviour. It identifies that, in general, pensions were not perceived as a current financial priority, with more immediate priorities taking precedence. Active engagement with pensions and uncertainties throughout the lifecourse, many of which people cannot control, presented a challenge to pension saving. Retirement was often seen as a distinct stage, with participants struggling to visualise their long-term future. The research contributes to the limited international understanding of attitudes towards pension knowledge and expectations, and their links to pension behaviour. It highlights the need for measures to encourage a greater focus on longer-term saving habits, accompanied by a context of collective policy solutions to pension challenges, as opposed to framing pensions in a purely individualised neo-liberal policy framework which adversely impacts on women's pension prospects.

This article evaluates the Australian retirement system using a framework of justice. Justice (alternatively, equity or fairness) is taken as requiring a full consideration of the criteria of needs, equality, liberty and just deserts, as well as matters of efficiency. Inequity occurs when the interests of weaker stakeholders are given inadequate consideration. Applying these criteria suggests that the Australian retirement system intrudes on the liberty of some groups of stakeholders inconsistently and inappropriately in mandating contributions at younger ages particularly, and by the imposition of unnecessarily bureaucratic means tests. It also fails to provide for the incapacitated older aged.

Choice Blindness is an experimental paradigm that examines the interplay between individuals’ preferences, decisions, and expectations by manipulating the relationship between intention and choice. This paper expands upon the existing Choice Blindness framework by investigating the presence of the effect in an economically significant decision context, specifically that of pension choice. In addition, it investigates a number of secondary factors hypothesized to modulate Choice Blindness, including reaction time, risk preference, and decision complexity, as well as analysing the verbal reports of non-detecting participants. The experiment was administered to 100 participants of mixed age and educational attainment. The principal finding was that no more than 37.2% of manipulated trials were detected over all conditions, a result consistent with previous Choice Blindness research. Analysis of secondary factors found that reaction time, financial sophistication and decision complexity were significant predictors of Choice Blindness detection, while content analysis of non-detecting participant responses found that 20% implied significant preference changes and 62% adhered to initial preferences. Implications of the Choice Blindness effect in the context of behavioural economics are discussed, and an agenda for further investigation of the paradigm in this context is outlined.

Traditionally, older people have been the key targets of Australia’s targeted welfare state. Flat rate pensions and widespread home ownership have ensured relative equality in older life. However, in response to perceived fiscal pressures generated by population ageing, Australia has increasingly shifted its policy settings, encouraging private savings over public risk pooling. Private savings are increasingly supported by public subsidy through tax policy. This has led to overlapping policy priorities, as public subsidies are used both as incentives to promote savings and as social policy instruments to promote adequate living standards in retirement. This conflict is evident in recent policy reviews of taxation, public spending and pension policy. This article explores the development of this conflict and how it manifests in proposals for reform. We argue that the conflation of welfare and taxation goals increasingly creates a dual welfare state that promotes private provision at the expense of both equity and efficiency. We suggest that more explicit identification of the roles of tax policy, and the welfare implications of tax changes, would help to improve policy design.

The COVID-19 pandemic has sparked a debate around the world on whether pension systems should be used to support individuals in economic distress. In Latin America, Chile, Bolivia and Peru have passed legislation allowing withdrawals from pension pots, yet with some significant variation. We argue that these measures cannot be simply understood because of the COVID-19 emergency alone but should also take into consideration the combination of legacies from previous pension re-reforms and the political institutional setting. We find that where previous re-reforms have been difficult to implement or have not been implemented at all and the institutional setting makes change difficult, measures that lead to a significant amount of savings being withdrawn may be favoured by political actors as a way to break the stalemate. By contrast, where re-reforms have been largely implemented and the political institutional setting poses few barriers to change, withdrawals may be more limited.

Many nations incentivize retirement saving by letting workers defer taxes on pension contributions, imposing them when retirees withdraw their funds. Using a dynamic life-cycle model, we show how ‘Rothification’ – that is, taxing 401(k) contributions rather than payouts – alters saving, investment, consumption, and Social Security claiming patterns. We find that taxing pension contributions instead of withdrawals leads to delayed retirement, somewhat lower lifetime tax payments, and relatively small reductions in consumption. Indeed, the two tax regimes generate quite similar relative inequality metrics: the relative consumption inequality ratio under taxed-exempt-exempt (TEE) is only 4% higher than that in the exempt-exempt-taxed (EET) case. Moreover, results indicate that the Gini measures are also strikingly similar under the EET and the TEE regimes for lifetime consumption, cash on hand, and 401(k) assets, differing by only 1–4%. While tax payments are higher early in life under the TEE regime, they are slightly lower in the long run. Moreover, higher EET tax payments are also accompanied by higher volatility. We therefore find few reasons for policymakers to favor either tax approach on egalitarian or revenue-enhancing grounds.

This paper examines the intertemporal choice preference for long-term savings of cocoa farmers in Ghana. We test the uptake of two pension products: with one, famers are free to withdraw 50% of their savings with no penalties prior to retirement age; with the other, only 30%. Using a randomised controlled trial we test the difference in uptake of two pensions products where we vary the flexibility of cash withdrawals from the pension account. We find an overall higher uptake of the more flexible pensions account, especially for women, who cannot inherit land titles in Ghana.