United Kingdom: Survey Shows More Older Workers Planning To Opt Out of Automatic Pension Enrollments

A survey conducted by B&CE with respect to its United Kingdom customer views and intentions around the introduction of the National Employment Savings Trust (NEST) in 2012 show that older workers are much more likely to opt out as automatic enrollment is phased in until 2017. While only 10% within the 18-34 age group indicated that they would opt out, as did 17% of those in the 35-54 range, 42% of those 55 and older said they would opt out.

John Jory, Director of B&CE Insurance Ltd, commented: "The survey results for the higher age bands are disappointing but perhaps not surprising." B&CE suggested that for older workers might feel that it’s too late to start saving, especially with the potential negative impact of means testing.

Source: B&CE Benefit Schemes News Release (January 26, 2010)

World Ecnomic Forum Develops Scenarios To Help Aging Societies Deal with Pensions and Healthcare

The World Economic Forum has issued a report arguing that the unprecedent rate of aging in the world is undermining the financial sustainability of traditional pension systems and healthcare and that urgent action is required in many countries. Through the use of scenario thinking, "The Future of Pensions and Healthcare in a Rapidly Ageing World-–Scenarios to 2030" aims to "bring the long-term consequences of ageing societies closer to the realities facing governments, businesses and NGOs today, and help everyone prepare for the challenges and opportunities that they imply."

In particular, the Forum argues that indicates that new forms of collaboration between key stakeholders--individuals, financial institutions, healthcare providers, employers and governments--will be critical to finance the ongoing well-being of current and future generations in a sustainable manner.

Source: World Economic Forum Press Release (September 23, 2008)

Book Review: "Working Longer: The Solution to the Retirement Income Challenge"

According to a New York Times book review of Working Longer: The Solution to the Retirement Income Challenge, overworked, underpaid, aging baby boomers may have no choice but to work longer and retire later if they want to avoid a precipitous decline in our accustomed standard of living. Hunter Hurt III refers to the book by Alicia H. Munnell and Steven A. Sass as "thought-provoking" (albeit "if sometimes cloistered academic terms") and as defining "succinctly the problem faced by baby boomers, and for that matter, by all Americans who aspire to retire now or in the near future."

The authors contend that working longer and retiring later can generate powerful benefits for aging baby boomers and the workers in their wake. First, it would delay the need for people to tap into I.R.A.’s and 401(k)’s, thereby swelling their total assets and increasing the future income they can produce.

Second, it would help maximize the benefits of Social Security, which are about one-third higher for recipients who are 66 than for those who are 62.

Source: New York Times "Who Wants to Retire Later? (Don’t Laugh)" (July 20, 2008)

Italy: Pension Proposals of Berlusconi Government

Proposals by the Italy's former Prodi-led government to phase in an increase in retirement ages and number of pensionable years held from 57 to 60 in 2010 will not be scrapped, although Maurizio Sacconi, Italian welfare minister, described it "an onerous mistake" of the previous government. According to news reports, "Sacconi wants to start using the new 'coefficients' or ratios through which pensions will be calculated as a function of contributions, from as early as this autumn, rather than the 2010 date set by Prodi's government."

In addition, Sacconi wants to narrow significantly the definition of "fatiguing" jobs or manual labor employment which officials believe allow people to retire at an earlier age. He also is encouraging greater attention to private pensions and has proposed setting up a European commission on pensions, with the specific objective of identifying a general strategy, capable of promoting development and re-direct towards patterns of growth.

Sources: IPE.com "New Italian government alters pension plans" (June 11, 2008); AGI News "Pensions--Sacconi: Right To Set Up A European Comparison" (June 7, 2008)

Older Workers Hold More Employer Securities in 401(k) Plans

According to a report issued by Financial Engines assessing how well Americans are handling their 401(k) plans, older plan participants are more likely to have high company stock concentrations. In particular, the report--The Financial Engines National 401(k) Evaluation--found that 43% of those over age 60 hold more than 20% of their 401(k) portfolios in company stock, compared to only 28% percent of those under age 30.

The report found similar trends with regard to higher concentrations of employer securities. For example, 25% of those over age 60 hold portfolios with 50% or more invested in company stock, compared to just 13% of those under age 30, and 15% of participants over age 60 hold 80% or more of their portfolios in company stock.

As Jeff Maggioncalda, president and CEO of Financial Engines, explained:

Unfortunately, the older employees holding the highest amounts of company stock have the least amount of time to recover if their company’s stock happens to take a hit. Many participants don’t realize that holding large amounts of company stock is actually a drag on the long-term growth of their portfolios.

Source: Financial Engines Press Release (May 12, 2008)

France: Pension Reform Proposals Aim to Retain More Older Workers

Pension reform proposals in France include measures to raise the number of older people in the workforce, including threatening companies with penalties if they do not increase their number of staff aged 55 to 64 and requiring employees to work 41 years, not 40, to qualify for a full state pension.

According to earlier pronouncements from the Labor Ministry, the Government's aim in building on the 2003 pension reforms is, among other things, to increase the level of employment of older people and to promote freedom of choice of everyone to prepare his retirement.

According to a March 25 letter from Minister Xavier Bertrand, the Ministry has just begun a phase of dialogue with all stakeholders and to solicit proposals from the social partners on various aspects of pension reform. At the end of this first phase of consultation, a policy document will be made public, a document on the basis of which discussions will continue with the social partners.

Sources: BBC News " France says 'take on older staff'" (April 28, 2008); Ministrère du Travail, des Relations sociales, de la Famille et de la Solidarité Dossiers (April 4, 2008)

EBRI Report Shows Women over 50 Much Less Likely To Receive Annuity and/or Pension

According to a report from the Employee Benefit Research Institute (EBRI), gender is a “particularly strong factor” in determining the likelihood of
whether a worker age 50 and older receives an annuity and/or employment-based pension income in retirement. Specifically, in 2006, women over age 50 were much less likely than men to receive annuity and/or pension income and if they did the amount was likely to be much smaller.

The study--"Retirement Annuity and Employment-Based Pension Income, Among Individuals Age 50 and Over: 2006; and Finances of Employee Benefits, 1950-2006"--evaluates the impact of gender, age, education, marital status, and other demographic factors in the likelihood of a worker receiving annuity and/or pension income in retirement. With respect to gender:

. . .the study reports that in 2006, some 44.6 percent of men age 65 and older received annuity and/or pension income, with a mean (average) amount of $17,200 per year. By contrast, only 28.4 percent of women age 65 and older received annuity and/or pension income in 2006, with mean pension income of $11,142 annually.

However, going forward, younger women are more likely to receive annuity and/or pension income and the amounts are likely to be greater, since younger women now spend more time in the work force.

With respect to factors other than gender, the study found:

• The likelihood of receiving annuity and/or pension income increases with age, until the oldest age group (80 and older).
• More men age 50 and older with a graduate-level education received annuity and/or pension income than men without a high school diploma.
• Men age 50 and older who were married or widowed were more likely to receive annuity and/or pension income than men of the same age who were never married. However, women age 50 and older who were never married were more likely to receive annuity and/or pension income than married women, but widowed women were much more likely to receive annuity/pension income than either married women or women who were never married.

Source: EBRI Press Release (January 17, 2008)

United Kingdom: Prudential Survey Shows Workers Retiring Early, but Golden Age is Ending

Accounts of a new Prudential survey in the United Kingdom state that, despite widespread concern about the pensions crisis, people planning on retiring in 2008 have in many cases never had it so good. Nevertheless, according to the rudential Class of 2008 Retirement Report, 2008 could be the beginning of the end for the golden age of retirement with younger generations facing a very different retirement future as experts warn 80% of final salary schemes are now closed to new members.

Reporting to be the first major study of people retiring in a specific year, the study finds the average age for men to give up work is 60 while women are retiring at an average 58 compared to statutory retirement ages of 65 and 60. Specifically, around 11% of men retiring in 2008 will be more than 65, while 33% of women will be more than 60.

Source: FirstRung.com "Retiring next year? You've never had it so good" (November 24, 2007)

OECD Issues Call for Better Protection of Occupational Pension Systems

Member countries of the Organisation for Economic Co-operation and Development (OECD) have agreed on new guidelines for governments and regulators designed to improve how certain types of pension funds are run with a view to making employees’ pensions more secure. The OECD Guidelines on Funding and Benefit Security in Occupational Pensions contain a series of recommendations concerning regulation of the funding of occupational pension plans, and in particular defined benefit pension schemes.

Issues covered by the guidelines include the funding and valuation of pension plans and protection of employees’ interests in company pension schemes in the event of their employer or the company that manages their pension plan going bankrupt. The guidelines also call on tax authorities to consider raising maximum funding levels, so as to allow pension funds to build up reserves that will protect them against a downturn in asset values.

According to OECD Secretary-General Angel Gurría, “[p]eople are living longer and need to be sure that their pensions are safe.” The guidelines "will be helpful to OECD countries to ensure that occupational pension plans offer secure retirement benefits to their members.”

Source: OECD News Release (May 10, 2007)

Norway: Pension Reform Agreement Supports Older Workers

Norway's center-left government and opposition parties reached a compromise on pension reforms that are intended to encourage older workers to stay in employment longer and to make pensions fair and sustainable. Among other things, future pension options will include retirement at age 62, but there are strong incentives to continue until age 70. According to an article by Aftenposten's Norwegian reporter Sigurd Bjørnestad, the agreement keeps Prime Minister Jens Stoltenberg's pension reform promise to give everyone more was more or less intact.

The new system is complex, with many new pros and cons, with the clearest perhaps being the ability to choose between a longer retirement on less of a pension, and working long to guarantee a more comfortable, though shorter, retirement. A key change is the ability to work as much as one likes after retirement without losing pension benefits.

Source: Aftenposten "Pension reform agreed" (March 22, 2007)

Other Sources: Ministry of Finance and Ministry of Labour and Social Inclusion The Pension Reform

United Kingdom: Flexibile Retirement and Pensions

Age Positive has issued a news release stating that, since the pension provision of the United Kingdom age regulations came into force on 1 December 2006, concerns have been expressed with regards to flexible retirement not being adequately covered by the regulations or accompanying guidance. In particular, points have been raised about the ability of employers and schemes to alter accrual or payment in the light of working beyond normal retirement age. According to the Department for Work and Pensions (DWP), this is a complex and developing area and it intends to examine whether it is possible to provide greater certainty where flexible retirement and pensions is concerned.

In conjunction, Age Positive has published a report--Flexible Retirement: A Snapshot of Employer Practices 2006--produced for DWP by Employers Forum on Age (EFA) and IFF Research Ltd. The findings include a practical guide (a checklist) for employers who may wish to take advantage of the rule changes in order to deliver flexible retirement options for their employees. In addition, it the report includes a small number of case studies illustrating how some large employers developed (or are in the process of developing) flexible retirement policies.

Source: Age Positive News Release (January 17, 2007)

United Kingdom: Participation in Defined Benefit Schemes Falls, Retirement Age Rises

The Office for National Statistics (ONS) has reported that membership of employer-sponsored defined benefit pension schemes fell from 39% 35% of employees between 2004 and 2005--down from 46% in 1997, when recordkeeping began. Membership of defined contribution schemes increased from 10% to 15% of the working-age population between 1997 and 2005, driven by increases in membership of group personal and stakeholder pensions.

The ONS publication Pension Trends has been updated to reflect this data. In addition, it shows that the average age at which male and female workers withdraw from the labour force is rising. In 2006, it was 64.2 years for men, the highest level since 1984, when data first became available. The average age for women was 61.8 years, the second-highest
on record.

In addition, employment rates of older men and women rose in spring 2006 to the highest levels since comparable records began in 1984. For men aged from 50 to under 65, the employment rate was 72.6% and for women aged from 50 to under 60, it was 67.9%. For men over that state pension age, the employment rate was 9.6% and for women, 11.1%.

Source: National Statistices News Release (Decenber 5, 2006)