Pension Reform evokes certain primary questions: what is a Pension System? What is its essence? Why do governments interfere in this area throughout the industrial world and increasingly in developing countries? (Modigliani and Murahlidhar, 2004).
2.1.1 The Concept of Pension
Pensions are a form of Social Security for the retired. It is meant to serve as a supplementary source of income to retired workers when their current earning power ceases (Modigliani and Murahlidhar, 2004). It has been defined as "a sum of money paid regularly to a person who no longer works because of age, disablement etc., or to his widow or dependent children, by the state, by his former employers or from funds to which he and his employers have both contributed" (Onifade, 2001). According to the third edition of Longman Dictionary of Contemporary English (2000), the word Pension is an amount of money paid regularly by a government or a company to someone who is officially considered to be too old or ill to earn money by working. Alternatively, pension can also be defined as periodic payment to one who retired from work as a result of old age or disability (Chinwuba 2004).
2.1.2 The Concept of Pension Scheme
A Pension Scheme or System however, is the totality of plans, procedures and legal processes of securing and setting aside funds to meet the social obligation of care which employers owe their employees on retirement or in case of death and disability (NICON, Abuja). It serves as a structured method of providing economic security to an individual when he can no longer support himself. As a pre-arranged and well thought out plan, it gives the beneficiaries the confidence that the benefits promised are being properly arranged and will be paid at the appropriate time (Onifade, 2001). It can also be viewed as a financial plan by which a worker's benefit is provided whenever it falls due according to the rules of the plan (Chinwuba 2004).
2.1.3 The Essence and Features of Pension Schemes
The primary purpose of a Pension System is to help households achieve an allocation of life resources by smoothing consumption over life, as postulated in the LifeCycle Hypothesis (LCH). This is achieved by transferring resources from ones working life to post-retirement when income dries up (Modigliani and Muralidhar, 2004).
There are basically three reasons for the existence of Pension Plans. These are: Social Insurance, Re-distribution, and Savings (Modigliani and Muralidhar, 2004).
Patrick, C 2004, The Guardian: Australia may hold key to pensions, 12 October 2004, retrieved 21 July 2006
In America’s early days before the kickoff of industry, there was little need for retirement savings for a few key reasons. First of all, people were dying at a much earlier age; most people didn’t live past 38, whereas in 1900, 60 years of age was common for about 40 percent of the population and 15 percent experienced 80 years of life. Another reason for the irrelevance of social security in the 19th century and earlier was that people were usually living rurally on farms with extended families to take care of them. Furthermore, the Civil War also didn’t allow the government much economic room to consider providing a service such as social security. However, after the Civil War, pensions were a form of social security for civil war veterans that carried into their retirement. Unfortunately these pensions provided support for only a very small portion of the population; not even one percent of Americans received these pensions. Despite a much lower need for social security in the 18th ...
In my position as a pension benefit specialist with Towers Watson, I have gained invaluable experience working with plan administrators to process participant request, address inquiries, and resolve disputes. Through this experience I have learned a great deal about pension law, pension plan design, processes, and policies. This experience has allowed me to exercise my skills in time management in adhering to client service level agreements to ensure participant’s request are handled in a timely fashion. In addition have had the chance to hone my research and analytical skills in reviewing and relaying retirement plan information to participants.
There are many trends aiding in the reshaping of Canada’s pension plan industry – going from greater employer interest in sharing or off-loading pension risk to an increased concentration on de-risking.10 An increasing amount of Canadian employees are switching from Defined Benefit plans by removing the DB option for new employees or by introducing a “soft or hard freeze”, according to Borden Ladner Gervais lawyer, James Fu.11 As DB plans are on the decline, Canadian industries are experiencing a growth in capital accumulation plans, such as voluntary retirement savings plans (VRSPs) and pooled registered pension plans (PRPPs) – new contracts designed mostly for the sake of the self-employed and for those employees lacking in workplace pension plans.12 In contrast, Canada’s Research-Based Pharmaceutical Companies assigned IMS Brogan to research and provide an estimation of the overall private drug costs for 2013 to 2017.13 Their report said that Canadian private pharmaceuticals plan drugs cost (such as wholesale and pharmacy makeup plus ingredients costs) should exhibit a growth of a compounded annual rate of 1.6% to 2.8%.14 Following the decrease in interest and benefits in pension plans, the Canada Pension Plan benefits have been increased by up to 1.2% for those already part of it.15 As seen in the article, Canadian companies large or small, are trending towards dropping the DB and DC pension plans and creating a more suitable hybrid program, involving DB and DC pensions
Mail workers from external organizations do not receive the benefit of a defined pension plan. The new standard for pensions has moved to contribution based pension plans. If Canada Post intends to follow this trend, they will need to prove that this decision was reached fairly by proving the costs of the defined pension plan is unaffordable given the economic climate of low interest rates. However, Canada Post’s workers do not experience procedural justice as the CUPW argues that the defined pension plan will develop a surplus once interest rates rise and would continue to remain solvent afterwards. The CUPW’s argues that the defined plan will rebound in the near future “CPC spokespeople are always talking about the deficit in the Canada Post Pension Plan. But they never mention that the plan also has a huge surplus. And while the surplus is growing, the deficit is decreasing… there is no reason to believe the plan will be terminated. Solvency deficits are caused by low long term interest rates. Should (or when) interest rates go up by only 1%, the solvency issue will disappear entirely” The methods Canada Post used to propose a change the pension plan was considered unfair by the CUPW and the temporary solvency problems of the plan is only
Unlike social security, people invest in their own retirement. People are able, when negotiating a contract, to decide how much they would like to put towards their retirement. One may decide how much of their salary will go into their retirement (How Does a 401(k) Plan Work?). Having a parent who participates in a 401(k) plan, I can personally vouch for the program. As stated earlier, it allows the worker to choose how much they would like to go into their retirement. They are also able to withdraw a portion of it even before they hit the retirement age. It allows people to have more financial control over their
b. Defined benefit pension plan—A pension plan that defines an amount of pension benefit to be provided, usually as a function of one or more factors such as age, years of service, or compensation. Any pension plan that is not a defined contribution pension plan is, for purposes of Subtopic 715-30, a defined benefit pension plan.
There are extensive studies on retirement covering education in general. The findings suggest that education is an important factor in affecting retirement planning preparedness (Hogarth, 1985; Joo&Pauwels, 2002). Education enables individuals to explore more information relating to their retirement planning and that sources of information will influence their decisions, attitude and intention to do retirement planning (Hogarth, 1985; Joo&Pauwels, 2002). Also, DeVaney (1995) addressed that the effect of education level may serve as a motivator or guidance for individuals to start the preparation for retirement planning. With the increase in age and educational level, individual tends to be more motivated to work on retirement planning preparation or take some action for their retirement (DeVaney, 1995).
The push for Congress to pass legislation protecting the rights of employees and their retirement was inevitable. Retirement plans are extremely important for all working individuals. Having funds to keep or exceed ones current standard of living and to enjoy one’s life beyond expectations after retire...
Pension provides an income when people have stopped working. Also, it provides important forms of insurance against long life, prices, relative benefit drops and savings shocks. As well as it is an important benefactor to the financial security of a majority of Australian men and women of retirement age, with about 70 per cent of people of pension age receiving the Age Pension (Australia and Treasury, 2015). The government can provide this type of insurance for less than it costs individuals to insure themselves by sharing long life risk, and hedging the
Life expectancy in Australia has been increasing steadily. The obvious result is being seen in the number and proportion of pensioners in Australia. The aging population with chronic diseases and disabilities, places a increased expectations and demand for health services and staffing shortages. Furthermore, an ageing population pose long term challenges in economic growth, living standards and government investments.
Pensions are considered the traditional retirement plan. Companies large and small are moving away from this type of plan due to the risks and costs that the employer must burden. This lessens the risk to the employee while guaranteeing that they will have a specific income after retirement that may increase due to cost of living and inflation.
Dewhurst, Elaine, and Ms Dafni Diliagka. "Increasing pension ages in Europe: The case of Legitimate Expectation."
After retirement, mostly people live alone with their partners, live as senior of the family or as the grandparents. Some of them move to the retirement villages in order to fulfill their daily basic requirements in the limited resources. According to the law, employers have to make contribution towards the retirement of the employees and this is done by contributing almost 9.5% of the employee’s salary into the superannuation fund [1]. This law is applicable for every employee whose age is 18 to 70 and is working for more than 30 hours per week. Individuals can also fund for their superannuation in order to secure their retired life. Superannuation fund can only be withdrawn after the age of 55 and for this there is a strict legislation. It can be withdrawn as lump sum or in the form of the pension [2]. According to the research, mostly men live 18.5 years after their retirements and mostly women live over 23 years after retirement whereas their superannuation funds last for almost 10 years of their retirement age [3]. That is why, now authorities are trying to increase the age of retirement so that people get to work a bit longer as organizations give preference to the young employees and do not want to hire the old minds.
Allers, Kimberly Seals. "How Fit Are Your Finances?" Ebony 68.9 (2013): 93-97. Academic Search Complete. Web. 15 Nov. 2013. Bauer, Gabrielle, and John Southerst. "A promising retirement: your life, your way." Maclean's 18 Feb. 2013: 37+. Opposing Viewpoints in Context. Web. 15 Nov. 2013.