The relationships between public and private pension schemes: an introductory overview

Only recently have social insurance and private pensions, collectively, come to be thought of in terms of a total social security benefit package. The economic problems brought on by the 1974 oil crisis initially triggered consideration of a common, integrated role for the two systems. The second oil crisis reinforced the relative expansion in private pension programs, as a supplement to social security. Before these events, private and public pension programs interacted in only a limited number of ways, confined to relatively few countries. These interactions were largely confined to collective bargaining, whereby private pensions were gradually extended to nearly all employees in France and Sweden; mandating, or legally requiring private supplementation of social security, debated in several countries in the early 1970's, but postponed by the 1974 oil crisis; and contracting out, or covering a part of the social security benefit under a private plan, as in the United Kingdom. Overall, the tradition of private pensions was not very strong or broadbased. The current debate centers on which public/private pension mix is desirable from the point of view of an old-age income-maintenance program. A new element is the rising support for a "third pillar"--individual tax-encouraged savings--not only as a supplement, but as an alternative to social insurance.     

Private social welfare expenditures, 1972-85

This article updates the private social welfare expenditures series with complete data for 1985 and information for most categories through 1986. In the United States, private sector expenditures play a substantial role in the provision of social welfare services. This article presents private social welfare expenditures in terms of the four major categories--health, education, welfare and related services, and income maintenance that includes private pensions, sickness and disability benefits, and group insurance. The private expenditures, which totaled $429.3 billion in 1985, are distributed by major category beginning in 1972 and are also related to public social welfare expenditures and gross national product.     

The Second Time as Tragedy? Welfare Reform under Thatcher and the Coalition

The welfare reforms of the Coalition government are marked by the legacy of Thatcherism. Social security reforms in the 1980s reshaped the system towards reliance on means‐tested benefits. Negative policy feedback created by the opacity and perverse effects of means‐testing has made these benefits an easy target for the Coalition, at least so far as working age people are concerned. Different policy feedbacks affect policy towards old age pensions. The government is locked into promoting private pensions, and is extending this commitment with automatic enrolment. To make private pensions pay, it has to reverse the slide to means‐testing. The implication is that the pronounced bias against the working poor and in favour of older people in Coalition policy is not simply a matter of electoral preferences: rather, it reflects the political effects of previous policy decisions.     

Relationship between the retirement, disability, and unemployment insurance programs: the U.S. experience

This article was prepared initially for an international conference of social security program administrators and researchers. They examined the reasons for, and implications of, a recent trend in several European countries toward making it easier to qualify for retirement or disability benefits as a way of alleviating long-term unemployment. The article notes that the United States has not followed this trend. Instead, this country has continued to use temporary extensions of unemployment insurance benefits as a way to help the long-term unemployed during recessionary periods. Since the mid-1970's, the emphasis in retirement and disability insurance programs has been to strengthen the financial integrity of these programs rather than to expand eligibility. Described here are the progression of extended benefit provisions of unemployment insurance through the most recent recession, the historical development of early retirement features in the social security program, and the more recent attention that has been paid to the financing issues that have played a central role in legislation during the late 1970's and early 1980's. Unemployment experience and trends toward early retirement are examined, along with the role of public and private employee pension plans that supplement social security retirement benefits. Preliminary data from the Social Security Administration's New Beneficiary Survey show the prevalence of such pension coverage for recent retirees and the extent to which these pension benefits were claimed before normal retirement age.     

Retirement income security in the United Kingdom.

This article examines the U.K. retirement income security system from the American perspective. It addresses issues that most concern U.S. analysts: how the United Kingdom has kept its future public pension costs at a manageable level, the extent to which privatization of public pensions has contributed to low pension costs, the popular appeal of individual pension accounts, and the impact of privatization on retirement income. These issues are best understood in the context of the U.K. pension program's particular institutional structure and policies, two of which--"contracting out" of public pensions, and strong reliance on means-tested benefits--have been largely rejected in the evolution of U.S. policy to date. Particular use is made of recently available data on coverage rates for public and private pension programs over the total working population and administrative records on inactive personal pension accounts.     

Economic security, 1935-85

The economic well-being of both working and retired persons has improved significantly since the Social Security Act was passed in 1935. More people are employed now than at any time since then, despite declining employment among the aged and more years of school attendance among the young. The ratio of non-workers to workers--a broad measure of dependency--is lower now than at any time since the 1930's. Social security has grown and matured to become a strong foundation of retirement income, and other work-related employee benefits have grown in tandem with social security. Employer contributions for social insurance and related employee benefits have grown from being about a 1-percent supplement to aggregate wages and salaries in 1929 to nearly 20 percent today. Social security and Medicare account for just over a fourth of employer contributions, while other public and private retirement systems represent just over another fourth. The balance of benefits for active workers includes group health and life insurance, unemployment insurance, workers' compensation, temporary disability insurance, and related benefits. Pay for holidays, vacations, and sick leave is estimated to have increased from less than 1 percent of aggregate pay in 1929 to about 10 percent today. The improved economic status of the aged has been documented by a series of surveys beginning in 1941-42 and carried out from time to time until 1972 and biennially since 1976. The earlier surveys were supplemented with estimates from record data and tables from the Bureau of the Census. The income of the aged as a whole has grown by about 75 percent over the past 2 decades after taking inflation into account. The income of the aged as a whole grew faster than that of the nonaged in the 1970's and early 1980's when real social security benefits increased faster than inflation and wages lagged behind it. New beneficiaries in 1982 were in better health and were more likely to retire because they wanted to than was true of their counterparts in the early 1940's. Not only have benefits continued to be the main component of income of the aged as total incomes have grown, but also benefits have become much larger in relation to average earnings than used to be the case. Retired workers are much more likely now than in the early 1940's to have other pensions or income from assets to supplement benefits.(ABSTRACT TRUNCATED AT 400 WORDS)     

Social Security as Poverty's Guardian

Although social security programs were originally introduced as measures to reduce the poverty of needy groups, factors such as coverage, vestedness, administrative regulations and the so-called "wage stop" effectively prevent millions of people throughout the world from living decently when their only source of income is from social security. In the overwhelming majority of social security programs worldwide, including old-age pensions, illness and maternity programs, workers compensation, and family or children's allowances, coverage is open only to workers and usually excludes housewives, transient workers, agricultural laborers, new immigrants and part-time workers. Similarly, vestedness requirements effectively prevent many people from receiving benefits. Administrative regulations, including waiting times and proof of status, add to the difficulties many people have in getting social security benefits. Most importantly, the stipulation in almost every program that no one should be able to get from welfare programs that which he or she could get from wages or salaries keeps the level of payments far below the poverty line. This paper will document and demonstrate the influence of social security programs throughout the world in contributing to the maintenance of poverty and will propose some radical solutions for overcoming the problem.     

Income of the population aged 55 and older, 1976.

This article inaugurates a biennial series of reports on the income of persons aged 55 and older. The survey on which it is based updates information on the broad economic picture for a cross-section of this population and forms the basis for an analysis of trends in the financial status of the group as a whole. In 1976, persons aged 55--61 were generally working full-time, not receiving income from pensions, and married. Those aged 73 and older were predominantly not working, mostly recipients of retirement pensions, and likely to be widows. Most persons aged 65 and older were receiving social security benefits; those with neither earnings nor a second pension constituted the largest subgroup and had the lowest median income. Married couples, as a group, were substantially better off financially than nonmarried persons because they were younger, two-person rather than one-person units, and had one member who was a man. Blacks were less likely than whites to receive pension income other than social security benefits, and their median benefits and earnings were both lower.     

The Political-Economic Dimension of Pensions: The Case of Japan

This article examines how pensions are interwoven with the public and private financial system in Japan and the consequences for pension reform. A growing literature focuses on the multifaceted ways in which pensions are interwoven with the larger political economy. This study builds on this literature and finds that (a) public and private pensions have been integrated deeply into Japan's system of developmental finance, (b) this integration has created new economic and political problems as governments have attempted to shift away from its developmental model through deregulation, liberalization, and administrative reform, and (c) because pension reform is intimately linked with these reforms, it involves addressing fundamental issues regarding the role of the state, finance, and firms. These findings collectively illustrate that pension reform is not only driven by issues of fiscal viability and benefit levels, but also by the nature of the way in which pensions are integrated into a country's system of finance.     

The effect of health on retirement

Results from retirement research suggest the following conclusions about health, retirement, and the likely effects of the changes in retirement age made by the 1983 Social Security Amendments. First, after controlling for non-health-related factors, it is clear that older workers who are in poor health retire earlier than workers with similar economic circumstances who are in good health. Second, the research reviewed here tends to indicate that the response of the average worker to the changes made in the social security full retirement age by the 1983 amendments will be small. Estimates suggest than the average increase in the retirement age will be between zero and 3 months. Finally, while the evidence is much less certain, research results suggest that older workers in poor health may respond even less than the average worker. It is not possible to say precisely what will happen to lifetime incomes as a result of these changes. A small labor supply response suggests that not much of the lost social security benefits will be made up by additional earnings, either for workers on average or for workers in poor health. However, earnings are only part of the total income picture. Other than a brief mention, this article has not addressed how workers may adjust their savings behavior, or how private pensions may adjust, and particularly whether the potential for adjustment through these avenues is the same for workers in poor health as for the average worker.     

International social security agreements: the U.S. experience

International social security agreements are advantageous both for persons who are working now and for those whose working careers are over. For current workers, the agreements eliminate the dual contributions they might otherwise be paying to the social security systems of both the United States and another country. They also favorably affect the profitability and competitive position of American companies with foreign operations by reducing their cost of doing business. For persons who have worked both in the United States and abroad, and who are now retired, disabled, or deceased, the agreements often result in the payment of benefits to which the worker or the worker's family members would not otherwise have become entitled. Credit for social security coverage the worker earned in the United States and the other country can be combined, if necessary, to meet eligibility requirements, and partial benefits can be paid by one or both countries. Because international social security agreements benefit both workers and employers, the agreements program is supported by organized labor and the international business community. Since the first agreement was signed 15 years ago, every Presidential administration has endorsed the program. In view of this support, and the fact that the agreements enhance the image of the United States as a socially progressive member of the international community, it is expected that totalization agreements will be concluded with additional countries in the future.     

Receipt of multiple benefits by disabled-worker beneficiaries

In 1971, 44 percent of workers who had been currently entitled to social security disability insurance (DI) benefits for 1 year or more also received benefits from at least one other source. Their average disability insurance benefit was higher than that of persons who received only DI benefits. On the average, total benefits to those receiving multiple benefits were double the amounts paid to those receiving only DI benefits. The combined benefits for the former produced median replacement rates about 50 percent larger than the median replacement rates for the latter. High replacement rates--defined here as more than 80 percent of predisability earnings replaced by benefit--predominate among those with multiple benefits. Considering replacement rates based solely on disability insurance benefits substantially understates the extent to which benefits from public and private programs actually replace predisability earnings. Replacement rates based solely on DI benefits are generally higher for those receiving DI benefits only than for persons receiving multiple benefits. Limiting DI benefits to the replacement rate from DI benefits alone is disadvantageous for persons who receive only DI benefits, compared with those who also receive other benefits.     

Pension Reform in Germany and Austria: System Change vs. Quantitative Retrenchment

This article first outlines the differences in outcome of pension reform in Germany and Austria. The 2001 German pension reform cut benefits very little, but it started a system changing transformation process by strengthening the second (occupational pensions) and third pillar (private pensions). The 2003 Austrian pension reform, pushed through against major opposition from the labour unions, contains very few elements of policy innovation, but benefits have been cut back much more significantly than in the German case. The paper explains the difference in outcomes (system change in Germany, retrenchment in Austria) by looking at the structure of political institutions. The federal government in Austria is much less constrained by formal veto players than the German government, which had to engage in extensive coalition-building to get the pension bill through the second chamber of parliament. Therefore the influence of informal veto players (mainly unions) was much higher in Germany. The impact on the reform outcome was the positive discrimination of occupational pensions and less severe cuts in the benefit levels. The concluding thesis is that for successful and long-term sustainable welfare state reform, a small number of formal veto players is a valuable resource. A large number of formal veto players is an obstacle to retrenchment reforms, although it might encourage policy innovation, because political actors will look for other policy venues to increase their leverage.     

State and local pension plans' equity holdings and returns

This article explores recent trends in the size and performance of the equity investments of state and local pension plans. It also provides a context for the discussion about investing Social Security trust fund reserves in private equities. Equity holdings and returns for five of the largest private pension plans were compared with those of state and local pension plans. Key findings discussed in the article include: Equities were the largest investment in the aggregate portfolio of state and local pension plans in 1999 and represented 67 percent of the $3 trillion in aggregate state and local pension assets. Equity allocation of the five private plans resembled that of the aggregate. About 80 percent of state and local pension plan holdings were domestic equities in 1999. The five largest plans had about the same domestic/foreign allocation of equity investments during that same period. In 1999, state and local pension plans held about 11 percent of the U.S. equity market, which includes foreign equities held in the United States. State and local pension plans held about 10 percent of domestic equities in the U.S. equities market that same year. Returns on equity investments over a 10-year period were more than 17 percent for both private pensions and state and local pension plans. Although private plans tend to have slightly higher total returns, the difference stems from the higher equity asset allocation of the private pensions that were studied.     

Class bases of universal social policy

Abstract. Institutional pension policy is held to be one of the trade marks of the celebrated Scandinavian model. Universal national pensions guarantee a decent livelihood to every citizen irrespective of socio-economic status. Income-related pensions that are paid on top of the national pensions secure the standard of living achieved during the working career. This Scandinavian institutionalism has usually been associated with long-lasting working class hegemony, consolidated by the deliberate goal of abolishing means-testing from national pensions and expanding the scope and quality of income-related pensions. However, some studies challenge this interpretation. Instead, they emphasize the crucial role played by the middle classes. By using survey data from Finland, this study seeks to determine which socio-economic groups are in favour of the present Finnish pension policy model characterized by universal basic pensions and income-graduated work-merit pensions. The results show that workers and farmers are more willing to introduce means-testing and flat-rate pensions than white-collar workers. Correspondingly, these groups are more sceptical of income-graduated benefits. Middle classes, especially upper white-collar workers, support income graduated benefits and are more reluctant than workers and farmers to introduce means-tested or flat-rate pensions. Thus, the results indicate that the support for the present institutional pension policy model in Finland is strongest among the middle strata. But the results also indicate that this support is greatly dependent on benefit form, and when debating on the class basis of the Scandinavian universalism, we must be more explicit in specifying which aspects of universalism are at stake.     

Looking in the Wrong Place: Why Chile Provides No Evidence for Social Security Privatization

The performance of Chile's system of state-sponsored private pensions has been a major theme for advocates of privatizing U.S. Social Security. Chile's experience also has been criticized by defenders of the current U.S. system. This article explains why, though the critics deserve the upper hand, the whole discussion is misguided. The most basic issue in the policy debate is how adequately pensions could be financed through regulated individual investment in financial markets. Chilean experience offers little evidence on this question because, for the first fifteen years of the system, pensions and accumulations in the Chilean funds had little to do with the kinds of market forces that would be relevant to predicting experience anywhere.     

Safe as Houses? Conservative Social Policy,Public Opinion and Parliament

Social policy is of key importance to contemporary society, accounting for two thirds of public expenditure and, through provision such as the NHS, pensions, benefits, schools, universities and social care, touching on the lives of much of the population on a daily basis. It has also been one of the areas where the Conservative party have sought to change their image, and to some extent policies, under David Cameron. Drawing upon a range of evidence, including interviews with more than ten per cent of the House of Commons and the House of Lords, this article examines the potential challenges for a Conservative government of either stance, focusing on the extent of possible support for the Conservatives' approach to social policy amongst three key groups: the public, MPs, and members of the House of Lords.     

‘Loose tweets sink fleets’ and other sage advice: social media governance,policies and guidelines

While social media represents a broad range of benefits to organisations and institutions, such as enhanced brand engagement, it also presents challenges and risks to reputation and security, such as confidentiality breaches. Employee use of popular social media platforms, such as Facebook and Twitter, both at work and about work has resulted in organisations developing social media policies and guidelines as part of contemporary governance practice. This paper investigates this recent approach to corporate governance by examining 20 social media policies and guidelines from a sample of corporate, government and third sector organisations that are active social media users. It develops a basic framework for social media governance based on the 13 common themes that emerge from the sample, including confidentiality, disclosure and the public–private divide of social media usage. It draws on social contract theory and considers its importance to the field of social media governance. Key implications for managers who are tasked with developing and implementing social media policies and guidelines are discussed. Copyright © 2014 John Wiley & Sons, Ltd.     

Mongrels or thoroughbreds: A cross-national look at social security systems

Abstract. This paper reviews the methodological issues raised by different commentators' attempts to categorise countries' social security systems into 'regime types' or 'models'. It is argued that there are two major problems with these categorisations: (1) the difficulty of finding empirical counterparts to the theoretical concepts used; (2) the complexity of actual social security systems, arising in particular from the diversity of benefits within each system. Despite these problems, we argue that it is possible to maintain a theoretically-informed approach to the comparative analysis of social security, by adopting a more flexible methodology. The approach presented in this paper identifies some of the main principles on which social security systems are based, specifies their empirical counterparts, and allows each national system to be analysed in terms of its particular conjunction or combination of principles.     

U.S. workers weigh‐in on the issue of portable benefits

As the sharing economy continues to grow and diversify, various institutes and members of government are contemplating the need for new employment regulations, including those related to portable benefits. However, there has been no known inquiry into this issue with those U.S. workers in the sharing economy. This paper presents exploratory research on the subject of portable benefits for workers engaged in the sharing economy and is intended to inform the development of future research questions and to determine the best research design and data collection method for a more extensive study. Arguably, rideshare drivers represent a large constituency of sharing economy workers in the United States and were utilized as the study population. Through authorized access to closed social media sites, this study explored the desire among rideshare drivers for portable benefits, how these benefits should be funded, and how such programs would be administered. The findings indicate that the majority of respondents were interested in the availability of portable benefits, although the preference for specific benefits varied widely among respondents. More than half believe companies, along with workers, should fund these benefits, and slightly less than half believe private sector third parties like insurance companies should administer these programs. However, given the transient nature of this workforce, administering such programs could prove to be quite challenging for organizations and plan administrators alike.