Category: Retirement

Iran Pensioners Protest Yet Again

Mary Pat Campbell
Iran Pensioners Protest Yet Again

Excerpt:

The 2020 census reported that there are some 18 million pensioners in Iran, who form part of the 96% of the population who live under the poverty line. Even the regime’s own statistics advise that over 75% of pensioners cannot afford the most basic goods, like food and shelter. This is because the average pension is 25 million rials per month even though some parts of the country have a poverty rate of 100 million rials after the economic crisis caused by the pandemic.

Author(s): Mostafa Aslani

Publication Date: 6 July 2021

Publication Site: Iran News Update

Fate of Pension Funds a Mystery in Latin America

Mary Pat Campbell

Link: https://www.occrp.org/en/daily/14770-fate-of-pension-funds-a-mystery-in-latin-america

Excerpt:

A dónde va mi pensión (Where is my pension going?), an investigation by the Press and Society Institute, IPYS, the Pulitzer Center and 13 news organizations, revealed that workers from nine Latin American countries have saved around US$500 billion for their pensions but that they have no idea how and where their money was invested.

The investigation found that in some cases the money ended up in questionable companies that violated local regulations concerning the environment or worker’s safety.

In Chile, for example, 36 companies financed by pension funds accounted for nearly 3,500 fines issued by the labor regulator over the last five years.

Author(s): JULETT PINEDA SLEINAN

Publication Date: 6 July 2021

Publication Site: Organized Crime and Corruption Reporting Project

What’s the Impact of Early Retirements on Plans?

Mary Pat Campbell

Link: https://www.ai-cio.com/in-focus/shop-talk/whats-the-impact-of-early-retirements-on-plans/

Excerpt:

Take the California State Teachers’ Retirement System (CalSTRS), which in February reported that it had its second-highest year for retirements in 2020, behind the fallout from the Great Recession. The pension fund reported a steep 26% jump in the second half of 2020 from the same time a year before. 

When the pension fund for educators surveyed roughly 500 of these retirees, about 62% said they retired earlier than they planned. More than half said the challenges of teaching during the pandemic pushed them to seek an early out. Still, a CalSTRS spokesperson said this week that the fund does not expect the retirements to have a “material impact” on the funding levels.  

Broadly speaking, any damage from early retirements is going to be “fairly muted,” according to Kevin McLaughlin, head of liability risk management for North America at Insight Investment. 

Author(s): Sarah Min

Publication Date: 1 July 2021

Publication Site: ai-CIO

Germany federal fiscal court demands changes to pension taxation

Mary Pat Campbell

Link: https://www.jurist.org/news/2021/06/germany-federal-fiscal-court-demands-changes-to-pension-taxation/

Excerpt:

Germany’s Federal Fiscal Court, the Bundesfinanzhof, demanded changes Monday to pension taxation to avoid future double taxation of retirement savings.

Prior to 2005, pensions had been basically tax-exempt because contributions came from taxed salaries. Under a 2005 law change, pension contribution payments gradually become tax-free. However, the taxable share of the pension increased. Because of the change, there is the potential of double taxation during the transition period if the tax-exempt portion of the pension is less than the contributions made earlier from taxed salaries.

A married couple who were assessed together for income tax purposes in 2009 filed a complaint against the rules, alleging that their 2009 tax assessment was unlawful. The court rejected the complaint as unfounded, stating that the plaintiffs had not been violated of their rights.

Author(s): Cassie Maas

Publication Date: 1 June 2021

Publication Site: Jurist

Means testing is a dog of a tax and it will destroy the welfare state

Mary Pat Campbell
Means testing is a dog of a tax and it will destroy the welfare state

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Excerpt:

Means tests must always turn regressive at some point in the income or wealth distribution. Because the means test withdrawal cannot exceed the benefit amount, the implicit tax can only rise with income or wealth so far. From there, it turns into a fixed sum tax, like the notorious Thatcher poll tax albeit phased-in at the lower end.

Consider the Australian Government’s Age Pension assets test, which functions as an implicit wealth tax targeted at the middle class. The single Age Pension benefit is approximately $953 a fortnight. The maximum implicit tax amount can then only be $953 per fortnight – whether you’re worth $600,000 or $600 million. The implicit tax amount payable by wealth (excluding the family home) for a single person is shown below.

Author(s): David Sligar

Publication Date: 5 June 2021

Publication Site: Western Sydney Wonk

Populists May Kill Chile’s Pension Success

Mary Pat Campbell

Link: https://www.wsj.com/articles/populists-may-kill-chiles-pension-success-11622670275

Excerpt:

Populist politicians are destroying Chile’s revolutionary pension system. In 1981 Chile became the first country to privatize social security, ending the pay-as-you-go system that had been in place since 1924 and had collapsed. Now Chile’s left wants to resurrect it.

The state-run pension system was plagued by corruption and rent-seeking since its earliest days. Among the 11,395 laws passed by the Chilean Congress between 1926 and 1963, 10,532 granted pension privileges to special-interest groups, many of them politically connected. In 1968, Chilean President Eduardo Frei, a center-left Christian Democrat, described the cronyism that plagued social security as an “absurd monstrosity” that the government couldn’t afford.

Pension privatization reversed this perverse dynamic. Instead of taxing active workers to pay pensioners through the bureaucracy, the new system, created by former Labor Minister Jose Pinera, established that 10% of the employee’s salary is transferred automatically to an account under his name at one of the Administradoras de Fondos de Pensiones, or AFP. These private pension funds compete to attract workers and invest their pensions for a fee.

This has restored the link between contributions and pension benefits by making workers responsible for saving the funds that will support them once they retire. This novel system also limited corruption and rent-seeking, and Chilean taxpayers are no longer on the hook for pension deficits, which in 1981 represented 3% of gross domestic product.

….

Longer life expectancy is also a problem. When the AFP system was created, men retired at 65 with an average life expectancy around 67. Women retired at the age of 60 with a life expectancy around 74. Today, the retirement ages are unchanged but life expectancy has increased to 77 for men and 83 for women. This means more years of retirement have to be funded by the same years of saving.

Author(s): Axel Kaiser

Publication Date: 2 June 2021

Publication Site: WSJ

Young women ‘must work 40 years longer than men’ to plug £100k pension gap

Mary Pat Campbell

Link: https://www.theguardian.com/money/2021/mar/08/young-women-must-work-40-years-longer-than-men-to-plug-100k-pension-gap

Excerpt:

Young women would have to work nearly 40 years longer than men to build up the same retirement pot, according to a report highlighting the pensions gender gap.

The average woman in her 20s can expect to have £100,000 less in her pension pot than a man of the same age as a result of earning less, working part-time, and taking time out of paid employment to care for family members.

The calculations, made by pensions company Scottish Widows to coincide with International Women’s Day, showed that a female saver would typically save £2,200 annually for the first 15 years of her career, compared with £3,300 for a young man. The average woman in her 20s today would have to work 37 years longer than a man of the same age to reach retirement parity.

Author(s): Shane Hickey

Publication Date: 8 March 2021

Publication Site: The Guardian UK

2.8 Million New York City Residents To Get Retirement Coverage

Mary Pat Campbell

Link: https://www.forbes.com/sites/teresaghilarducci/2021/05/19/28-million-new-york-city-residents-to-get-retirement-coverage/?sh=5cbd24fb5d4a

Excerpt:

At the end of April, the New York City Council took a bold step and approved a city-sponsored retirement plan for private-sector employees who do not have retirement coverage at work, creating the city’s first ‘auto-IRA’ (individual retirement account). SCEPA’s Retirement Equity Lab, which testified in support of the policy, estimated the New York auto IRA plan will provide coverage to 2.8 million city workers that today have none. 

Mayor de Blasio signed the bill last week implementing the city’s auto-IRA program.

The NYC Auto IRA Bill Is Well- Designed

Employers with more than five employees will have to automatically deduct a percentage of their workers’ pay and forward it to city-facilitated, not-for-profit IRAs. (Employers with less than five employees, self employed, and gig workers need to voluntarily join.) Auto IRA account’s are individually-owned and professionally managed, and administered by an independent board headed by city-appointed trustees. While employers are required to participate, employees would have the right to change their contribution rates or opt-out of the program. The plan is also portable; participants can maintain their accounts when they change jobs. 

Author(s): Teresa Ghilarduci

Publication Date: 19 May 2021

Publication Site: Forbes

Chicago Boys’ Free-Market Pension Model Is Unraveling in Chile

Mary Pat Campbell

Link: https://www.bloomberg.com/news/articles/2021-05-10/chicago-boys-free-market-pension-model-is-unraveling-in-chile?sref=htOHjx5Y

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Excerpt:

Chile’s privately run pension funds are in a battle for survival, reeling under the impact of billions of dollars of withdrawals as politicians and social movements attack a system once viewed as a model for the world.

Chileans have taken out more than $30 billion from their retirement savings in the past year and congress has authorized a third wave of withdrawals that could drive the figure to more than $50 billion. That would leave the pension funds with about $180 billion of equities and fixed-income assets. Many lawmakers are now calling for the whole system to be dismantled.

…..

Created during the dictatorship of August Pinochet on the advice of free-market economists known as the Chicago Boys, the private pensions Chileans are required to fund are a bedrock of the country’s system. The savings they have generated over the past four decades have given local credit markets and the peso a stability that is the envy of serial defaulters such as Argentina or Ecuador, and prompted countries including Peru and Colombia to adopt similar structures. Yet, many complain that the funds have failed to provide decent pensions.

Distrust in the system, and a need for cash, meant Chileans rushed to pull money out of their savings accounts as the pandemic forced the government to shutter much of the economy.

Author(s): Eduardo Thomson

Publication Date: 10 May 2021

Publication Site: Bloomberg

DO MEN WHO WORK LONGER LIVE LONGER? EVIDENCE FROM THE NETHERLANDS

Mary Pat Campbell

Link: https://crr.bc.edu/wp-content/uploads/2021/04/IB-21-8.pdf

Graphic:

Excerpt:

As expected, the raw data show that Dutch men who worked at ages 62-65 were less likely to die over the subsequent five years than men who were not working (see Figure 1). Importantly, Figure 1 shows that mortality decreased at nearly identical rates for working and non-working men between 1999 and 2008, before the policy became available. The fact that these trends are parallel provides more confidence in the policy experiment, indicating that whatever was happening to working men prior to the DWB was also happening to non-working men. In contrast, the mortality rate in 2009-2011 continued to improve somewhat for working men, who were benefiting from the DWB, while the mortality rate for non-working men plateaued.

Author(s): Alice Zulkarnain, Matthew S. Rutledge

Publication Date: May 2021

Publication Site: Center for Retirement Research at Boston College

U.S. Retirees’ Experience Differs From Nonretirees’ Outlook

Mary Pat Campbell

Link: https://news.gallup.com/poll/350048/retirees-experience-differs-nonretirees-outlook.aspx

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Excerpt:

The differences in reliance on income sources between those who are already retired and those who are not yet retired are likely attributable, at least in part, to apprehension about the Social Security system, as well as the rise of 401(k)s accompanied by a decline in work-sponsored pension plans.

57% of retired U.S. adults say they rely on Social Security as a major income source, and 38% of nonretirees expect it to be a major source for them.

Likewise, 36% of retirees and 19% of nonretirees say a work-sponsored pension plan is or will be a major income source.

Nonretirees are most likely to say a 401(k) or other retirement savings account will fund their retirement (49%). Meanwhile, 35% of retirees mention 401(k)s as a major funding source of their retirement.

Author(s): Megan Brenan

Publication Date: 18 May 2021

Publication Site: Gallup

Who Really Pays for ESG Investing?

Mary Pat Campbell

Link: https://www.wsj.com/articles/who-really-pays-for-esg-investing-11620858462

Excerpt:

A recent analysis by Scientific Beta disputes “claims that ESG funds have tended to outperform the wider market.” Sony Kapoor, managing director of the Nordic Institute for Finance, Technology and Sustainability, a think tank, told the Financial Times that the research “puts in black and white what is only whispered in the corridors of finance — most ESG investing is a ruse to launder reputations, maximize fees and assuage guilt.”

BlackRock’s former chief investment officer for sustainable investing, Tariq Fancy, appears to understand this. He recently wrote in USA Today that he was concerned about portfolio managers exploiting the “E” of ESG investing because “claiming to be environmentally responsible is profitable” but advancing “real change in the environment simply doesn’t yield the same return.” Mr. Fancy criticized “stalling and greenwashing” in “the name of profits.”

This is a tacit admission that ESG investing upends the fiduciary duties portfolio managers owe their clients. As Mr. Fancy acknowledged, “no matter what they tout as green investing, portfolio managers are legally bound” to “do nothing that compromises profits.” As former Labor Secretary Eugene Scalia wrote on these pages last year, under the federal law that protects retirement assets, known as Erisa, “one ‘social’ goal trumps all others — retirement security for American workers.”

Author(s): Andy Puzder, Diane Black

Publication Date: 12 May 2021

Publication Site: Wall Street Journal