Whom Can I Rely on? The Impact of China's Public Pension Program Expansion on the Expectations for Old-Age Support

Aging is a global trend and China is no exception. Older people in China mostly rely on their adult children for old-age support. This traditional provision pattern of old-age support, however, is challenged by hundreds of millions of internal migrant workers. They relocate from rural to urban regions for better employment and are no longer able to provide old-age support to their older parents in rural areas. The aim of this study was to determine the impacts of China’s public pension program expansion in rural areas on older people’s expectations for old-age support. Utilizing the natural experiment of program expansion, this study identified an instrumental variable as the county adoption of the pension program. In addition, the study analyzed a nationally representative longitudinal dataset CHARLS with fixed effects model. Results from the statistical model showed that given the participation in the pension program, older adults reported more reliance on pension for old-age support financially and less reliance on children. Heterogeneous effects were found for older adults living together with children and older adults living independently. These important findings suggest that the government partially assumes the responsibility for the old-age support of adult children in the traditional sense. The potential benefits of this study provide a policy implication for developing countries to alleviate old-age support problems and enable internal migration for economic development.

Underestimating Lifespans? Why Longevity Risk Exists in Retirement Planning and Superannuation Policy

<p>The pace of increasing life expectancy in recent decades came as a surprise to demographers, as mortality rates unexpectedly improved at the oldest ages in developed countries. The most common policy response, although one not yet planned for New Zealand, is to increase eligibility age for the public pension. Given the complexity and uncertainty of processes driving mortality improvement, future lifespans cannot be known. However, it is questionable whether policy makers and individuals understand the extent of past and likely future lifespan increase. Available evidence suggests individuals tend to underestimate how long they may live. Population mortality forecasts are generally conservative and poorly explain longevity uncertainties. Longevity risk - the possibility that future lifespans will be longer than anticipated - threatens individuals' pre-retirement financial planning and public pension policy. This thesis examines the extent of longevity risk, its causes, significance and remedies, in these two domains, for New Zealand. The theoretical existence of longevity risk has been acknowledged, but has not been subject to critical analysis in New Zealand or elsewhere. Here, a unique generalisable methodology exploiting insights available from international mortality comparisons is designed, combining actuarial and demographic theory. After assessing the flaws in the time-dependent or period approach to measurement of life expectancy that are known in theory but underexplored in practice, the method emphasises the lifecourse or cohort approach. The three factors that determine longevity risk - plausible population lifespan prospects, the lifespan assumptions used by policy makers and individuals' subjective lifespan expectations - are identified and the relationships between them analysed for New Zealand. An interpretation of the consistency of New Zealand's past mortality trends and future projections with those of other British settler countries, supplemented by a review of the consequences of mortality variance within New Zealand, shows that plausible lifespans in New Zealand are likely to be higher than those in the official projections on which policy makers rely. The first survey to ask how long New Zealanders think they will live shows that collectively, New Zealanders are more likely to underestimate future lifespan than not, based on a variety of beliefs about mortality that are not consistent with the evidence on increasing lifespans. Longevity risk from underestimation of future lifespans is revealed in New Zealand policy making and in individual New Zealanders' retirement plans. The most likely cause is the repeated misuse of life expectancy indicators in an environment lacking public discourse about increasing longevity. A remedy would be switching from using flawed period life expectancy indicators to using cohort life expectancy or modal age at death. Using plausible estimates for future lifespans based on more optimistic estimates than the official projections most often referenced would be important but mitigate longevity risk to a lesser extent. A more extensive public debate than has been held so far about eligibility age for New Zealand's public pension would itself, if using appropriate indicators for future lifespans, provide an opportunity to address longevity risk.</p>

Underestimating Lifespans? Why Longevity Risk Exists in Retirement Planning and Superannuation Policy

<p>The pace of increasing life expectancy in recent decades came as a surprise to demographers, as mortality rates unexpectedly improved at the oldest ages in developed countries. The most common policy response, although one not yet planned for New Zealand, is to increase eligibility age for the public pension. Given the complexity and uncertainty of processes driving mortality improvement, future lifespans cannot be known. However, it is questionable whether policy makers and individuals understand the extent of past and likely future lifespan increase. Available evidence suggests individuals tend to underestimate how long they may live. Population mortality forecasts are generally conservative and poorly explain longevity uncertainties. Longevity risk - the possibility that future lifespans will be longer than anticipated - threatens individuals' pre-retirement financial planning and public pension policy. This thesis examines the extent of longevity risk, its causes, significance and remedies, in these two domains, for New Zealand. The theoretical existence of longevity risk has been acknowledged, but has not been subject to critical analysis in New Zealand or elsewhere. Here, a unique generalisable methodology exploiting insights available from international mortality comparisons is designed, combining actuarial and demographic theory. After assessing the flaws in the time-dependent or period approach to measurement of life expectancy that are known in theory but underexplored in practice, the method emphasises the lifecourse or cohort approach. The three factors that determine longevity risk - plausible population lifespan prospects, the lifespan assumptions used by policy makers and individuals' subjective lifespan expectations - are identified and the relationships between them analysed for New Zealand. An interpretation of the consistency of New Zealand's past mortality trends and future projections with those of other British settler countries, supplemented by a review of the consequences of mortality variance within New Zealand, shows that plausible lifespans in New Zealand are likely to be higher than those in the official projections on which policy makers rely. The first survey to ask how long New Zealanders think they will live shows that collectively, New Zealanders are more likely to underestimate future lifespan than not, based on a variety of beliefs about mortality that are not consistent with the evidence on increasing lifespans. Longevity risk from underestimation of future lifespans is revealed in New Zealand policy making and in individual New Zealanders' retirement plans. The most likely cause is the repeated misuse of life expectancy indicators in an environment lacking public discourse about increasing longevity. A remedy would be switching from using flawed period life expectancy indicators to using cohort life expectancy or modal age at death. Using plausible estimates for future lifespans based on more optimistic estimates than the official projections most often referenced would be important but mitigate longevity risk to a lesser extent. A more extensive public debate than has been held so far about eligibility age for New Zealand's public pension would itself, if using appropriate indicators for future lifespans, provide an opportunity to address longevity risk.</p>

Two different paths to sustainability? A comparison of a Finnish and a Swedish public pension reserve fund

The role played by finance in allocating resources has become crucial in modern economies. Responsible Investing, i.e., the integration of non-financial criteria (such as environmental, social, and governance (ESG), negative/positive screening, and active ownership) into the investment process, has gained an important role. Does this apply to pension funds, too? This article compares two public pension reserve funds, one from Finland and one from Sweden, and describes their path towards responsible investments. The article shows that although having taken different paths, responsible investing has been clearly integrated into the investment process of both funds during the last decades. In Finland, the role played by pension fund insiders has been remarkable. In Sweden, legislators have played an active and significant role in the process. The design of the pension system equally plays an important role in the overall process. In Sweden, cooperation is promoted in responsible investments. In Finland, pension system design fosters competition, thereby reducing cooperation in investments. This article adds more information on the scarce comparative research on public pension reserve funds.