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May 2022

Do Pensions Reduce Debt?

By Wei Chen This paper estimates the causal impact of receiving pension payments on debt behavior among older adults, with a natural experiment around China's New Rural Pension Scheme (NRPS), one of the world's largest social pension programs. Using a fuzzy difference in discontinuity research design and four waves of the China Health and Retirement Longitudinal Survey (CHARLS), I find that the introduction of the NRPS reduced debt among older adults, and increased their ability to shield themselves against shocks,...

The DC Future Book 2021: In Association With Columbia Threadneedle Investments

By Pension Police Institute & Investments Columbia Threadneedle Columbia Threadneedle Investments has supported The DC Future Book since its inaugural publication six years ago. We are pleased to see that it has become the foremost longitudinal study of the UK Defined Contribution (DC) market we envisaged it to be. This is a special edition indeed – it is the first time that the Pensions Policy Institute has been able to track DC market activity against the backdrop of a major crisis....

Assessing Heterogeneity in the Health Effects of Social Pensions Among the Poor Elderly: Evidence from Peru

By Noelia Bernal Lobato, Javier Olivera & Marc Suhrcke This paper exploits the discontinuity around a welfare index of eligibility to assess the heterogeneous health impacts of Peru's social pension program Pension 65, which focuses on elderly poor individuals. The heterogeneity is analysed in terms of the treatment exposure (short vs long run), the accessibility to health care infrastructure (near vs distant facilities), and gender. We find improvements in anaemia, mortality risk markers, cognitive functioning, mental health, and self-reported health....

April 2022

Wealth After Work Innovative Reforms to Expand Retirement Security

By William G. Gale, J. Mark Iwry, & David C. John Pensions and retirement saving plans have helped millions of households build financial security. But tens of millions of people have been left behind, without access to these wealth accumulation vehicles. For many others, the plans they have do not ensure financial security in retirement. The problems that underlie these failures can be addressed. This book proposes concrete, practical ways to make dependable retirement income accessible for all Americans—not just those...

The economy-wide effects of mandating private retirement incomes

By George Kudrna This paper investigates the economy-wide effects of mandating private (employment-related) pensions. It draws on the Australian experience with its Superannuation Guarantee legislation which mandates contributions to private retirement (superannuation) accounts. Our key objective is to quantify the long-run implications of alternative mandatory superannuation contribution rates for household economic decisions over the life cycle, household welfare, and macroeconomic and fiscal aggregates. To that end, we develop a stochastic, overlapping generations (OLG) model with labor choice and endogenous retirement,...

March 2022

How Do Households Adjust Their Earnings, Saving, and Consumption After Children Leave?

By Andrew G. Biggs, Anqi Chen & Alicia H. Munnell Whether parents adjust their consumption after their children leave home has important implications for our understanding of retirement income adequacy. Prior studies have found that parents reduce consumption after their children become independent, allowing them to save more for retirement. Other studies, however, have found that savings for retirement does not increase. If households are both consuming less but not saving more after the children leave, where are the resources...

A Sustainable, Variable Lifetime Retirement Income Solution for the Chilean Pension System

By Olga Fuentes, Richard K. Fullmer & Manuel Enrique Garcia Huitron There is a need in pension systems to significantly improve the level and stability of pension payments as pensioners age. Solutions to address increased longevity and longevity risk should be not limited to increasing the take-up rate of annuities – explicit guarantees are costly in a low-interest rate environment, and lock-in of savings may not be in line with members' preferences. Our proposal is to develop a Sustainable, Variable...

Partial De-Annuitization of Public Pensions V.S. Retirement Age Differentiation. Which is Best to Account for Longevity Differences?

By Vincent Vandenberghe Extensive research by demographers and economists has shown that longevity differs across socioeconomic status (SES), with low-educated or low-income people living, on average, shorter lives than their better-endowed and wealthier peers. Therefore, a pension system with a unique retirement age is a priori problematic. The usual policy recommendation to address this problem is to differentiate the retirement age by SES. This paper explores the relative merits of partial de-annuitization of public pensions as a way of addressing...

Exponential Growth Bias and the Law: Why Do We Save Too Little, Borrow Too Much, and Fail to React on Time to Deadly Pandemics and Climate Change?

By Doron Teichman & Eyal Zamir Many human decisions, ranging from the taking of loans with compound interest to fighting deadly pandemics, involve phenomena that entail exponential growth. Yet a wide and robust body of empirical studies demonstrates that people systematically underestimate exponential growth. This phenomenon, dubbed the exponential growth bias (EGB), has been documented in numerous contexts, across different populations, using both experimental and observational methods. Despite its centrality to human decision making, legal scholarship has thus far failed to...

Allowing Early Access to Retirement Savings: Lessons from Australia

By Nathan Wang-Ly & Ben Rhodri Newell In response to the COVID-19 pandemic, many governments around the world introduced policies aiming to provide citizens with financial relief through early access to their retirement savings. In Australia, the Early Release of Super (ERS) scheme allowed eligible citizens to withdraw up to A$20,000 in funds between April and December 2020. Using data provided by a large Australian bank, we examine the characteristics of the individuals who withdrew, how they used the withdrawn...