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Pension experts “too gloomy” on PAYG

GLOBAL – A United Nations researcher, in a review of pension literature, has said that the reports are “too gloomy” on pay-as-you-go pension systems and that intergenerational problems can be made to disappear.

The comment came in a review of seven major studies – including reports by the European Union and Germany’s Bert Ruerup.

“It is the opinion of this reviewer that these studies are much too gloomy because they focus on PAYG pension systems as systems of taxes and transfers rather than as systems of forced saving for old age,” writes the UN’s Larry Willmore.

“If contributors to pensions are treated as purchasers of government debt, most fiscal problems and problems of intergenerational equity disappear.”

Willmore was writing in his own capacity in a new Oxford Institute of Ageing publication called ‘Ageing Horizons’. He added that workers “have a number of options” if they want to retire with more income provided by the so-called Samuelson-Aaron return on PAYG contributions.

“They can save voluntarily, they can lobby for government to mandate contributions to pre-funded pensions, or they can retire at an older age.

“It is important for government to provide proper incentives, to avoid facilitating early retirement via disability pensions or penalizing those who choose to postpone retirement and save for old age.

“With these policy changes, Europeans can relax and enjoy their longer, healthier lives and increasing per capita incomes.”

“Arguments about generational justice are prominent in some recent high-profile proposals for reforming pension arrangements, especially in mainland Europe,” said Kenneth Howse of the Oxford Institute of Ageing.

“Arguments about the part that public pensions have still to play in ensuring that retired people secure a fair share of society’s output of goods and services are also prominent in criticism of these proposals.”

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