Retirement – Page 3 – Actuarial News

Excerpt:

A reform of France’s pension system is set to push up the minimum retirement age from 62 to 64. The government has said the measures are needed. But most French, and even a number of economists, disagree.

The demonstration on a recent Thursday afternoon could be a bad omen for President Emmanuel Macron. About 80,000 people gathered in Paris, and over 1 million across France — more than at any other French protest in over a decade. They were there to show their opposition to the government’s pension reform plans, which even some economists disapprove of.

Protesters in the street leading from Place de la Republique to Place de la Bastille in northeastern Paris were holding up placards saying things like “I love my pension” and “This [reform] is not inevitable, it does not create social justice.”

….

But the government has said the reforms are necessary to save France’s pay-as-you-go system, where workers pay for pensions through their levies. “The ratio of workers to pensioners is going down and that is threatening our system. With this project, we’ll guarantee the future of our retirement model,” Prime Minister Elisabeth Borne said before the Senate in mid-January.

As opposed to certain other European countries, France’s pension system does not include any capital-funded elements. It comprises general branches for private employees and public servants, and 27 so-called special pension schemes for, for example, ballet dancers or police officers that benefit from an earlier retirement.

The government now aims to increase the system’s overall minimum retirement age from 62 to 64 years by 2030. And from 2027 on, people will need to work for 43 years — instead of the current 42 — to receive a full-rate pension.

Macron’s plans would maintain an earlier retirement for people who started working at a young age and preserve certain special pension schemes. Others, such as the plans for metro drivers in Paris, are to be cut. The government also aims to increase the minimum pension by about €100 ($108) to €1,200 per month.

Money is, of course, Macron’s main argument. The reform is based on a report by a government-mandated expert committee that predicts pension payments will amount to up to 14.7% of GDP in 2032, instead of the current 13.8%.

Author(s): Lisa Louis

Publication Date: 30 Jan 2023

Publication Site: DW

France: Over 1 million march against raising retirement age

January 23, 2023January 23, 2023 Mary Pat Campbell

Link: https://apnews.com/article/france-retirement-age-limit-protests-866eb86aea5cf0d39894b96d2888c26f

Excerpt:

At least 1.1 million people protested on the streets of Paris and other French cities Thursday amid nationwide strikes against plans to raise the retirement age — but President Emmanuel Macron insisted he would press ahead with the proposed pension reforms.

Emboldened by the mass show of resistance, French unions announced new strikes and protests Jan. 31, vowing to try to get the government to back down on plans to push up the standard retirement age from 62 to 64. Macron says the measure – a central pillar of his second term — is needed to keep the pension system financially viable, but unions say it threatens hard-fought worker rights.

Out of the country for a French-Spanish summit in Barcelona, Macron acknowledged the public discontent but said that “we must do that reform” to “save” French pensions.

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In a country with an aging population and growing life expectancy where everyone receives a state pension, Macron’s government says the reform is the only way to keep the system solvent.

Unions propose a tax on the wealthy or more payroll contributions from employers to finance the pension system instead.

Polls suggest most French people oppose the reform, and Thursday was the first public reaction to Macron’s plan. Strikes severely disrupted transport, schools and other public services, and more than 200 rallies were staged around France.

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Under the planned changes, workers must have worked for at least 43 years to be entitled to a full pension. For those who do not fulfil that condition, like many women who interrupted their career to raise children or those who studied for a long time and started working late, the retirement age would remain unchanged at 67.

Those who started to work under the age of 20 and workers with major health issues would be allowed early retirement.

Protracted strikes met Macron’s last effort to raise the retirement age in 2019. He eventually withdrew it after the COVID-19 pandemic hit.

Retirement rules vary widely from country to country, making direct comparisons difficult. The official retirement age in the U.S. is now 67, and countries across Europe have been raising pension ages as populations grow older and fertility rates drop.

Author(s): SYLVIE CORBET and JADE LE DELEY

Publication Date: 19 Jan 2023

Publication Site: Associated Press

Millions march in France against Macron’s pension cuts

January 23, 2023January 23, 2023 Mary Pat Campbell

Link: https://www.wsws.org/en/articles/2023/01/20/fxax-j20.html

Excerpt:

Two million people struck or marched in protests yesterday called by union federations against President Emmanuel Macron’s pension cuts. Polls show around 80 percent of the population oppose the cuts, which would increase the minimum retirement age to 64 with a minimum pay-in period of 43 years. Strike calls were widely followed by rail and mass transit workers, school staff, and electricity and refinery workers, and 200 protest marches were held in cities across France.

Trade unions reported that 400,000 people marched in Paris, 140,000 in Marseille, 38,000 in Lyon, 60,000 in Bordeaux, 50,000 in Toulouse and Lille, 55,000 in Nantes and 35,000 in Strasbourg. Moreover, many smaller cities saw large turnouts that surprised police authorities. There were 25,000 in Orléans, 21,000 in Le Mans, 20,000 in Nice, 19,000 in Clermont-Ferrand, 15,000 in Tours, 13,000 in Pau, 10,000 in Chartres, 9,000 in Angoulême and 8,000 in Châteauroux.

Author(s): Alex Lantier, Anthony Torres

Publication Date: 20 Jan 2023

Publication Site: World Socialist Web Site

Pensioner at 43? Turkey introduces Early Retirement

January 6, 2023January 6, 2023 Mary Pat Campbell

Link: https://www.novinite.com/articles/218274/Pensioner+at+43%3F+Turkey+introduces+Early+Retirement

Excerpt:

Over 2 million Turks will be able to retire at any time as long as they have worked for at least 7,200 days. Critics warn of the dangerous consequences of this pre-election move by President Erdogan, writes Deutsche Welle.

The door of the Pension and Social Security Office in Istanbul’s Unkapani district is locked. However, a long line has formed on the sidewalk in front of it – people are waiting for the lunch break to end.

The 49-year-old toy seller Murat, who is among those waiting, started working at the age of 13. Now he wants to know if he can retire immediately. “Actually, 49 is too early,” he admits. “But if the state gives you such an opportunity, you should take advantage of it,” he adds.

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Similar queues are currently being seen in many places after President Recep Tayyip Erdogan announced that the minimum retirement age would be abolished. According to him, this will affect about 2 million people. Until now, women had the right to retire at 58 and men at 60. From the middle of January, only the time worked will be taken into account. This means that 7,200 days of service will qualify for retirement.

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Another problem is that the earlier people receive pensions, the earlier they stop making contributions to the insurance system. So it is in danger of collapsing in the long term, says the woman, who did not want to be named. “This is at the expense of future generations,” economist Senol Babuscu told Turkey‘s Karar TV. “How much damage we are doing to future generations remains to be seen.”

The upcoming costs of the Turkish state are also not yet known. But the Labor Minister predicted the bill would come out to at least €5 billion.

Publication Date: 4 Jan 2023

Publication Site: novinite.com

South Korea spent $200 billion, but it can’t pay people enough to have a baby

December 5, 2022December 5, 2022 Mary Pat Campbell

Link: https://www.cnn.com/2022/12/03/asia/south-korea-worlds-lowest-fertility-rate-intl-hnk-dst/index.html

Excerpt:

South Korea recently broke its own record for the world’s lowest fertility rate. Figures released in November showed the average number of children a South Korean woman will have in her lifetime is down to just 0.79.

That is far below the 2.1 needed to maintain a stable population and low even compared to other developed countries where the rate is falling, such as the United States (1.6) and Japan – which at 1.3 reported its own lowest rate on record.

And it spells trouble for a country with an aging population that faces a looming shortage of workers to support its pension system.

Author(s): Paula Hancocks

Publication Date: 3 Dec 2022

Publication Site: CNN

Impact of COVID-19 on Defined Benefit Pension Plan Funding

November 17, 2022November 17, 2022 Mary Pat Campbell

Link: https://www.theactuarymagazine.org/impact-of-covid-19-on-defined-benefit-pension-plan-funding/

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Excerpt:

Higher interest rates already have translated into higher discount rates for solvency and accounting valuations, which means good news (lower liabilities) for DB pension plans. The sensitivity of a pension plan’s liabilities to the discount rate used to determine their value depends on the demographics of the plan members, the type of valuation and level of discount rates being used. Generally, the “duration” for most pension plan liabilities (defined here as the percentage decrease in liabilities for a 1% increase in discount rates) will range from 10 to 25.

In the United States, the average accounting funded ratio increased from 94.6% in July 2021 to 104.5% in July 2022, according to the Milliman 100 Pension Funding Index, despite significant decreases in plan assets during that time. This is because the average accounting discount rate (typically based on long-term, high-quality bond yields) increased from 2.59% to 4.25% during that same period, driving down accounting liabilities at a faster pace than asset losses. Figure 1 demonstrates this effect in more detail.

Author(s): John Melinte

Publication Date: November 2022

Publication Site: The Actuary at SOA

2021 Risks and Process of Retirement Survey

November 7, 2022November 7, 2022 Mary Pat Campbell

Link: https://www.soa.org/resources/research-reports/2021/retirement-risk-survey/

Full report: https://www.soa.org/48fd8a/globalassets/assets/files/resources/research-report/2021/risks-retirement-findings.pdf

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CHAPTER HIGHLIGHTS:
• Despite the COVID-19 pandemic, level of concern about various risks remains historically low this year for both pre-retirees and retirees. Compared to 2019, level of concern dropped on some issues for retirees. As a result of this drop, retiree concerns are lower than those of pre-retirees by a larger gap than ever before.
• The one exception to this trend was concern about fraud. In 2021, both retirees and pre-retirees were
more concerned about fraud, and it is the highest concern among retirees, particularly Black/African
American retirees. As in prior studies, those with lower income tend to show much higher levels of
concern.
• The biggest concerns for pre-retirees are their savings and investments not keeping up with inflation, not being able to afford long-term care, not being able to afford health care costs, not being able to maintain a reasonable standard of living throughout retirement, and potentially depleting all their savings.
• While half of pre-retirees plan to retire gradually rather than all at once, retiree respondents indicate this
seldom actually happens. Higher-income pre-retirees are more likely to plan to go straight from full time
employment to retirement.
• The COVID-19 pandemic has not affected plans that pre-retirees have for work, living arrangements, and
lifestyle in retirement, although over a quarter report changing their lifestyle.
• Despite the financial challenges that retirement poses, most do not have financial advisors, especially preretirees, lower-income respondents, and Black/African American respondents.

Author(s): Greenwald Research

Publication Date: February 2022

Publication Site: Society of Actuaries

Milliman analysis: Corporate pension funding ratio surges to 112.8% in October thanks to rising discount rates

November 7, 2022November 7, 2022 Mary Pat Campbell

Link: https://www.prnewswire.com/news-releases/milliman-analysis-corporate-pension-funding-ratio-surges-to-112-8-in-october-thanks-to-rising-discount-rates-301669154.html

Excerpt:

Milliman, Inc., a premier global consulting and actuarial firm, today released the results of its latest Milliman 100 Pension Funding Index (PFI), which analyzes the 100 largest U.S. corporate pension plans.

During October, the Milliman 100 PFI funded ratio rose from 108.8% on September 30 to 112.8% on October 31, reaching a new high for the year. The change was driven by a 35-basis-point hike in the monthly discount rate. The PFI projected benefit obligation decreased to $1.266 trillion as the discount rate rose from 5.36% in September to 5.71% for October—the highest rate since March 2010. This increase helped to offset October’s flat investment returns of 0.21%, which lowered the Milliman 100 PFI asset value by $4 billion.

Publication Date: 4 Nov 2022

Publication Site: PRNEWSWIRE

German pensions could rise by up to 4.2% in 2023 – proposal

November 7, 2022November 7, 2022 Mary Pat Campbell

Link: https://www.reuters.com/markets/europe/german-pensions-could-rise-by-up-42-2023-proposal-2022-11-05/

Excerpt:

BERLIN, Nov 5 (Reuters) – Germany’s more than 20 million pensioners will likely see their state benefit rise by up to 4.2% from July 2023, according to a governemt proposal seen by Reuters, lower than the expected inflation rate of 7.0%.

The state pension in western Germany will rise by 3.5%, while in former East Germany it will increase by 4.2% according to the draft, as the government continues to narrow the gap between the two regions.

Author(s): Holger Hansen, Christoph Steitz

Publication Date: 5 Nov 2022

Publication Site: Reuters

Interest Rate Hikes Will Make Climate Change Worse

October 25, 2022October 25, 2022 Mary Pat Campbell

Link: https://jacobin.com/2022/10/interest-rates-climate-change-liz-truss-tories

Excerpt:

Raising interest rates won’t just push Britain into a recession and make the cost-of-living crisis worse for working-class people — it will discourage badly needed investments in green energy, undermining the UK’s efforts to address climate change.
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The theory goes that higher interest rates help bring inflation down by making credit more expensive across the economy and reducing the amount of money firms and families have to spend on goods and services, thereby slowing price increases. But our inflation is predominantly driven by external factors, most notably high gas prices resulting from COVID-19 supply issues and the war in Ukraine. Instead, the bank’s policy is likely to push the UK economy into a recession, without addressing the main underlying causes of rising prices. That also means higher costs of borrowing for the very investments we need to reduce our reliance on costly fossil gas, like wind farms and home insulation.
To compound the problem, higher interest rates discourage investment in clean projects more than dirty ones. Running renewables doesn’t cost much: they rely on free wind and solar energy instead of expensive fossil fuels. But building them in the first place does come with high initial costs, meaning they are particularly impacted by the higher costs of credit. Similarly, insulation and heat pumps need to be paid for up front, before they begin to lower energy bills for households. Demand for improvements like heat pumps is significantly influenced by the availability of cheap loans to cover the initial installation costs.

Author(s): LUKASZ KREBEL

Publication Date: 23 Oct 2022

Publication Site: Jacobin

Transcript: Tom Rampulla

October 20, 2022October 20, 2022 Mary Pat Campbell

Link: https://ritholtz.com/2022/10/transcript-tom-rampulla/

Excerpt:

BARRY RITHOLTZ, HOST, MASTERS IN BUSINESS: This week on the podcast, I have an extra special guest, Tom Rampulla has been with the Vanguard Group since 1988. He has worked with every CEO, starting with Jack Bogle, all the way up to the current CEO Tim Buckley, and has essentially helped to establish the Financial Advisors Group, essentially the group at Vanguard that works with RIAs and broker dealers and other financial professionals who provide portfolios, advice, financial plans to the investing public.
He has a unique perch from with which to view the financial services industry, both from within Vanguard as well as looking out over the financial landscape and seeing what’s going on with such trends as mutual funds, ETFs, direct indexing, the rise of passive, the rise not just of Vanguard, but the dominance of Vanguard, and the associated Vanguard effect, the pressure on fees that have helped make investing so affordable. We discussed all these things as well as why there has never been a better time to be a retail investor than right now, right here in this era. I found the conversation to be absolutely fascinating, and I think you will also.
So with no further ado, my conversation with the Vanguard Group’s Tom Rampulla.
I’m Barry Ritholtz. You’re listening to Masters in Business on Bloomberg Radio. My special guest this week is Tom Rampulla. He is the managing director of Vanguard’s Financial Advisor Services Division, where he began back in 2002. That group provides investment services, education and research to more than a thousand financial advisory firms, representing more than $3 trillion in assets. Tom joined Vanguard back in 1988. Tom Rampulla, welcome to Bloomberg.
THOMAS RAMPULLA, MANAGING DIRECTOR, FINANCIAL ADVISOR SERVICES DIVISION, VANGUARD: Thanks, Barry. It’s great to be here.
……
RAMPULLA: You talk to them off the ledge. My clients, the advisors are really earning their fees right now, and providing a tremendous amount of value. So there’s a lot of phone volume, a lot of digital volume, so we’re very, very, very busy. And you know, it’s all about calming people down, we’ll get through this, you look at the long term. Things tend to work out. We — you know, our investing philosophy is, first of all, get an objective, put a plan together, make sure it’s a low cost plan.
And the other thing is be disciplined, right. Stick to your plan, just get rid of the noise. This is big noise. This isn’t just some little blip. This is big noise, but you know, get rid of noise and be disciplined. Most times that’s around rebalancing. This time, stocks and bonds are both going down, so you’re not rebalancing so much. But you know, March of 2020 was a great opportunity to rebalance and add some value. So it’s really sticking to that long-term approach and that discipline is what we really recommend.

Publication Date: 18 Oct 2022

Publication Site: Barry Ritholtz