Archive for the ‘Pensions’ Category

pre-funding social pensions in Bermuda

Sunday, April 22nd, 2018

At least some residents of Bermuda, a wealthy self-governing British Overseas Territory in the North Atlantic Ocean, with a tiny population of 63,779, are worried that government has not saved enough to pre-fund its noncontributory old-age pension promises. Benefits as of 2015 were US$103.81 a week for residents aged 65 and older with total annual income greater than $4,000 and US$106.83 a week for residents with less income. Additional requirements are citizenship and at least 10 years of continuous residence in Bermuda in the past 20 years. (more…)

private and social pensions in Latin America

Sunday, April 8th, 2018

FIAP (Federación Internacional de Administradoras de Fondos de Pensiones/International Federation of Pension Funds Administrators), the Latin American trade group of private administrators of government-mandated contributory pensions, now acknowledges the need for social pensions, financed from general government revenue. Private managers of Latin American pension funds in the past tended to ignore social pensions, at least in part because these provide little or no opportunity for private profit.

A recent 9-page FIAP report begins by explaining the need for social pensions: (more…)

call for universal pensions in the Philippines

Saturday, March 31st, 2018

Senator Grace Poe has filed a Bill to provide all citizens aged 60 years and older a monthly pension of P1,500 (US$29). (more…)

towards universal health care in Burkina Faso

Friday, March 30th, 2018

When only 1% of your population has health insurance, the road to universal coverage is a long one. Burkina Faso is beginning this journey, but is off on a rocky start.

In 2012 an initiative was launched to provide healthcare for the “poorest of the poor”. The International Social Security Review, a journal published for the International Social Security Association under the under the auspices of the International Labour Organization, has an article on this in the latest issue. Unfortunately, it is available to subscribers only. I do not have a subscription, so could only read the abstract, which I reproduce below.

The initiative was not successful, as might have been predicted, as the poor were required to make co-payments, no doubt on top of their insurance contribution, and were limited to three visits to a doctor or hospital per year. It is not clear from the abstract if this limitation was per family or per family member. (more…)

Kenya launches universal pensions

Sunday, January 21st, 2018

Beginning this month – January 2018 – every resident of Kenya over the age of 70 years is entitled to a pension funded solely by general government revenue. The pension is modest, and the age of entitlement is high, but it is an excellent beginning. Previously, only 240,000 of the 390,000 Kenyan citizens over 70 years of age received means-tested, targeted pension benefits. Targeting will continue for social pensions given to persons between the ages of 65 and 69 years. (more…)

social pensions in Myanmar

Friday, December 29th, 2017

Social pensions in Myanmar are tiny, and provided to fewer than 40,000 older persons. The country is taking modest steps to increase the size and coverage of pensions. Much remains to be done. (more…)

social pensions in the Philippines

Tuesday, December 19th, 2017

The city of San Fernando, in the Philippines, is an excellent example of how NOT to support older persons. According to a recent newspaper article, “The city is a pioneer is providing free movie access in various malls here as well as ensuring yearly programs and activities for seniors.”

Free movies and social activities, however, do not substitute for cash benefits. The requirements to qualify for a social pension in San Fernando are clearly designed to stigmatize rather than encourage participation. (more…)

social pensions in India

Sunday, December 3rd, 2017

India, in theory if not in practice, provides social (non-contributory) pensions for all residents older than 60 years who live in families poor enough to be listed as BPL (below poverty line). The social pension, known as the “Indira Gandhi National Old Age Pension Scheme” (IGNOAPS) provides beneficiaries aged 60–79 a monthly pension of Rs 300 (US$4.60). Those 80 years and older are entitled to monthly benefits of Rs 750 (US$11.50). (more…)

longevity insurance (annuities)

Saturday, August 5th, 2017

Here is excellent advice from a British expert in personal finance. Longevity risk – the risk of outliving one’s savings – is underestimated or ignored by many.

[T]he most important type of risk that most people fail to buy insurance against is living too long — longevity risk. Many people are now shunning using at least some of their pension fund to buy a level or inflation protected guaranteed annuity, because they focus on the perceived poor value of annuities, compared with the rates on offer 10 years ago.

Jason Butler, “Insurance — a vital component of financial planning”, Financial Times, 3 August 2017 (gated paywall).

means tests are taxes: Canadian edition

Sunday, July 23rd, 2017

Canada provides persons from age 65 with a Guaranteed Income Supplement (GIS, currently C$871.86 a month for a single person), but claws it back at the steep rate of 50% from other income. There is no exempt amount, and some provinces add to this. The provincial claw back in Alberta, for example, is 18%, bringing the total rate of claw back to 68%.

Canada also provides residents from age 65 with an Old Age Pension (currently a maximum of $585 a month for a single person) that is reduced (clawed back) at the rate of 15% from taxable income in excess of $74,788 a year, so is equivalent to an increase in income tax of 15 percentage points for high income older persons until the full Old Age Pension is recovered. Receipt of the Old Age Pension does not count as income for a GIS.

Why do government policymakers in Canada implicitly tax the income of older persons at a higher rate than of younger persons with the same incomes? Perhaps they do not realize that means tests (clawbacks) are taxes. Simultaneously, though, the government has programmes in place to encourage workers to save for old age, to build up a retirement fund that is subjected to a high rate of taxation in old age. This puzzles me.

Canada also mandates contributions to a state pension, known as Canada Pension Plan. Canadian actuary Robert Brown, in a useful article, explains why increasing the contributions to (and benefits from) this plan harms contributors with low incomes, because it causes them to lose benefits that they would otherwise receive from the Guaranteed Income Supplement. He doesn’t mention this, but taxpayers with high incomes also lose benefits from expansion of the noncontributory Old Age Pension. No doubt he assumes (most likely correctly) that those with high incomes can look after themselves! Also, $585 a month is small change for someone with an income in excess of $6,200 a month. (more…)