...Crisis in Pension Systems. Many countries are experiencing the pension crisis which means that they don’t have enough money to pay future pensions for old people. This essay analyzing two possible solutions which can resolve pensions system problem. There are number of possible reasons of the pensions system’s problem. Firstly, earlier there can be noticed low birth rates in plenty of countries. As a result in present time the number of people of working age reduced which resulted into low tax revenues. In addition, it can be seen that people’s life expectancy increased and therefore there is higher proportion of elderly people comparing with a total population which can lead to the increased strain on pension funds. Another reason for poor performs of pension funds can be international financial crisis which has significantly resulted into uncertainty in stock market and it has led to the weakness of financial institution. One solution, which is common, is to increase retirement age of people. Public sector workers and people receiving state pensions must work longer. In order to receive their pension they should reach the statutory retirement age. For example, many European countries, including the UK and France, have increased retirement ages. Due to the fact that this solution delays the pension funding, it gives governments more time to adjust economic policies and hope the economy will be stronger in the future. As this solution produces considerable saving it can be...
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...“Aging Europe and the looming pension crisis.” 1. Why have governments tended to avoid the problem of pension reform? Why is it harder to avoid the problem in the 21st century? How the demographic changes have created problems for pensions? Governments are worried about the sustainability of current pension schemes as changes in demographics are indicating that these schemes will not be able to sustain themselves in a few years time. Fertility rates heavily increased in the post World War II period (1960 a representative year) and decreased subsequently, creating the “baby boom”, which has been an important factor in the 21st century population aging. Current fertility rates are experiencing historic lows; at an European Union (EU ) average 1.58 live births per woman, it is significantly below the level needed to replace the population (2.1) . Such changes have significantly increased the average percentage of EU population aged 65 and over, from 9.6% in 1960 to 16% in 2010, which is expected to increase to 22.6% by 2030 . This statistic shows that increasingly more people will have to be supported by government pensions. In the EU the average life expectancy at birth has risen by 10 years over the last 50 years , which means that pension schemes have to support each member increasingly longer than before. The average old age dependency ratio (OADR) in the EU, which measures the amount of elderly people for every 100 people of working age, has increased from 15% in 1960...
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...11.3 million drew a state pension compared with 11.5 million children under 16 years * Currently the average age of the population is 39.6 and this will reach 40.6 by 2016 and 42.6 by 2031 B & Q - Opportunity > The firm found that the older generation was no less productive than a younger workforce > 38,000 of B & Q employees are over the age of 50 > B&Q was the first British company to target older people > Illegal to discriminate on the grounds of age. Similar regulations also exist of religion, beliefs or sexual orientation. > Older people are more likely to be home owners and have some knowledge of DIY, making them more reflective of the customer base and ideally placed to offer in store support and great customer service > customer service, short-term absenteeism, staff turnover and sales were all positive trends for the firm due to older generation of workers > “With a profit increase of 18%, along with greater customer satisfaction, gave us the proof we needed to continue recruiting an age diverse workforce” Stagecoach – Opportunity Ageing population > Bus passes increase by 2.31% which led to revenue increasing to £2,930,000 increase by 9.5% Further aging population lead to increase in more sales and support expansion programme as capacity needs to be increased to keep up with demand. By 2030 they have vision of 30% UK market share which currently stands at 16%. Tata Steel Pension Scheme – Threat The company...
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...dependents-people younger than 15 or older than 64--to the working-age population--those ages 15-64. So the questions of my research is to find out how the quantity of pre-working-aged children and retired influences the saving per capita. Would people save more in their working age in order to save money for retirement period or to invest -or they will earn and spend. Another issue is to see if countries with huge level of GDP( China, the USA) have the different extent of ADR influence on savings and how it is differ from Russia and ,for instance, Brazil. This problem is actual and important because nowadays countries face the problem of capital outflow . As we can see from the current statistics databases, there were such demographical crisis since the 1950 , especially in Asian countries and because they are mostly overpopulated, it has an impact on the world situation in general. According to the theoretical economic models, Investment=Savings, so if I define what impact have demographical structure of population on saving per capita I could predict the future saving and investment in countries using the obtained results of influence. The model. To define, what could also has the impact on savings and what I could add to my regression mode, I analyzed some economical articles and papers. In that case, I started by reading the research work of F. Modigliani, famous Italian economist and Nobel-awarded, about the conception of the life-cycle model. Working out this conception...
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...`THE DEVELOPED WORLD IS AGEING AND IS THERFORE FACING A PENSION CRISIS` WORDS COUNT: 797 DATA: 10/03/2012 Going back through human history elderly people were only tiny minority of the population. In 1935 when Social Security Scheme was introduced to prevent poverty in old age elderly people accounted for only 3 to 4%of the population. Nobody suspected that in the future the developed world would face pension crisis caused by shifting demographic. Rising longevity and falling birth rates would cause a lower ratio of workers per retire,which will result in difficulty in paying for state or federal pension. Nowadays people are living longer than ever before and retirement pensions have become a problem. At present “developed countries are experiencing a dramatic and unprecedented demographic transformation” (Jackson and Howe, 2008) which may lead to pension crisis in the nearer future. This essay highlights two key problems that are causing development world aging and emphasise the importance for solution to prevent developed countries from pension crisis. The fact that developed countries are aging is a result of two fundamental trends like falling fertility and rising longevity. Falling fertility is reflected in a decrease in the number of young people. Declining birth rate is a result of changes in women`s life styles. Nowadays women in developed countries getting higher education and taking paid jobs; career comes before having babies. This means getting married...
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...1. The United States military retirement is very costly for tax payers in our current financial crisis and should be altered to reduce the cost on the American tax payer. Three solutions to reduce the cost of the military retirement are as follows; increase the required time in service to 25 years at 50% of the highest 5 years earnings, eliminate the pension and contribute only to the Thrift Savings Plan (TSP), and maintain the existing retirement plan and change the age to start collecting benefits to age 50. 2. The current military system is very costly to American tax payers. In fiscal year 2015 $56 billion was paid to approximately 2.3 million military retirees and survivors.1 The average active duty non-disability enlisted retiree is...
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...Public Pension – Detroit crisis After the economy financial crisis, most public pensions were already on crisis. The pension crisis is a difficulty in paying for corporate, state and federal pensions in the U.S. due to a difference between pension obligations and the resources set aside to fund them in the future. That is because many of public pension plans discount their pension liabilities at high interest rates assuming the plan will achieve high returns on their investments. However discounting is supposed to reflect the idea that a liability is being paid. If someone knows for sure that a payment will come at a certain time in the future, he will put away the full amount needed in order to pay that obligation; however, if there is reason to believe the payment may not come thru, he may put away a smaller amount in the hopes that he can cover the rest when it comes due. However, in the case of pensions the payments are guaranteed by law, the government having the money or not, thus it is inappropriate to discount them at a high rate. People depend on this money for their future. The high discounts rates let politicians off the hook by lowering today’s payment on behalf of tomorrow’s retirees which is easy to do when you are not suffering currently, and the expectations of the future can be mislead and perceived highly than it should. America’s public pension crisis has arrived. A large number of municipalities, counties and states are experiencing severe...
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...GASB 68: An Examination of Affects to the Pension Problem Including Stakeholder Interests Private retirement systems are regulated by the Pension Benefit Corporation (Employee Retirement Income Security Act of 1974); state and local governments are not subject to federal regulation but rather voluntarily comply with GASB standards. (Mattrell, 2013) With all the newsworthy stories involving public pensions, analysts were becoming increasingly critical of GASB regulation over the pension systems. When compared to the requirements of the private retirement systems, it was lacking in transparency. Thus, GASB replaced statement 27 with 68. Government entities with a financial period ending June 30, 2015 will be first to experience the implementation of GASB 68. Many feel that GASB 68 is part of the solution for the ever-increasing public pension crisis in the United States but is reporting for the first time ever in most cases a rather large Net Pension Liability (NPL) on the face of the financials going to solve the problem of underfunded pensions. Employees within the public sector generally enjoy a rather generous pension when compared to others but when they are looked at for their sustainability they fail miserably. Chicago retirement system for teachers, fire fighters and others us underfunded by nearly $24 billion, with residents facing potential 150% increase in property taxes. (Birrer, 2014) Public pension systems in the United States are in need of change if they...
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...Manning & Napier Advisors, LLC Defined Benefit Pension Plan Investing: Time for a Solution that Works June 2011 Approved CAG-CIT PUB015-R (10/11) Introduction The beginning of the 21st century has been perhaps the most trying environment ever for defined benefit pension plan sponsors. This is perhaps best evidenced by the decline in the number of single-employer defined benefit plans covered by the Pension Benefit Guaranty Corporation (“PBGC”), which has gone from 53,589 in 1995 to 1 27,647 in 2009 . Clearly, two of the worst bear markets in U.S. history and a generally low interest rate environment have greatly contributed to today’s pension crisis. However, the investment strategies employed by many pension plans over this period have failed to recognize the intertwined relationship between plan assets and plan liabilities. Likewise, many investment strategies have lacked the flexibility needed to meet plan goals across a wide range of market environments. Understanding the Investment Needs of Defined Benefit Pension Plans An important first step in developing an investment strategy for any pension plan should be to understand the nature of the plan’s liabilities, which also means recognizing that the asset/liability relationship exists. Too often, the investment industry talks about pension plans as if they are one homogeneous type of investor, when, in fact, each plan has its own unique characteristics and needs. Clearly, a well-funded, young plan...
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...By: John Deere For years, the country of Greece was a great place to call home. It had a very high-income economy and was one of the world leaders in terms of standard of living for its citizens. The tourism industry was growing faster and faster and helped to fuel the fire beneath the economy. In fact, Greece’s economy expanded at one of the highest rates in the Euro zone in the early 2000’s due to the high volume of tourists that it accommodated. Unfortunately for them, this growth was about to come to an abrupt halt. When the world economy took a turn for the worse, all of the money that Greece had been borrowing in order to fund large projects was examined more closely. It was revealed that Greece had been over-borrowing at such staggering levels that even the EU was shocked. With a down world economy, they were no longer able to borrow at such cheap rates and could not pay off their debts (Hoffman, CBS News). Throughout the rest of this paper, I will examine exactly what led Greece into this mess and what policies that the Greek government should put in place in order to try and resolve this issue with the least amount of damage possible. First things first, let’s look at how Greece got into so much trouble. During the good times, the Greek government decided to borrow billions upon billions of dollars to help the country grow. This would have been fine if they were receiving enough tax revenue in order to cover these debts but, of course, they were not. ...
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...According to the IMF, fiscal stimulus must be customized to the nature of the crisis. That’s why a slow acting fiscal policy can be used on the current crisis (while usually it comes too late and adds up inflation). Expenditure measures are hence appropriate because of their direct stimulation of the demand. Moreover, due to the lack of accurate and reliable estimates, IMF also recommends the diversification of the fiscal policies used in order to maximize their effectiveness. The global nature of the current crisis and the different capacities of the worldwide governments involved imply the necessity to coordinate the stimulus plans in order to yield better and quicker benefits that will help out the countries with lower abilities (free-rider externalities effect). By analyzing the situation from 2008 to end 2010, it appears that the recovery is on track but risks and uncertainty remain. The next move then is to consolidate and create an adequate environment for balanced and sustained economic growth, fiscal sustainability and financial stability on a worldwide level. Using short term fiscal policies, the governments should first increase their credibility and consolidate their budgets by employing fiscal rules. Second, the exit from the exceptional fiscal policies used should be well timed to a strong growth or delayed if conditions are still weak: “difference between US - Europe vs. Japan”. Third, the fiscal policies used in developed countries will generate capital inflows...
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...Cyprus is an island located in the eastern Mediterranean Sea. Although most of its residents are of Greek origin, Cyprus has always had conflict between the Greek and Turkish residents. A financial crisis started occurring when Cyprus joined the European Union in 2004 and joined the Eurozone in 2008. Two months after joining, they had a presidential election that elected a communist president. “This government took a country with excellent fiscal finances, a surplus in fiscal accounts, and a banking system that was in excellent health. They started overspending, not only for unproductive government expenditures but also they raised implicit liabilities by raising pension promises, and so forth.” ("What happened in Cyprus") Around that time, the Euro was suffering a decline in value especially in Greece. This had a huge effect on Cyprus’ economy because they are a large holder of Greek government and corporate bonds. “In fact, the fact that the value of Greek debt was written down as part of the bailout deal for Greece actually meant that Cyprus was essentially pushed towards needing a bailout itself.” (“The Cyprus Financial Crisis”) During this difficult time, the two main banks, Cyprus Popular Bank and the Bank of Cyprus, couldn’t keep up with the losses and requested help from the government. The Cypriot government attempted to help by nationalizing the Cyprus Popular Bank but this in turn increased the national debt so much that the government needed a bailout. The government...
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...accounting estimates that Harnischfeger made during 1984. Estimate, as accurately as possible, the effect of these on the company’s 1984 reported profits. Harnischfeger made significant accounting policy changes after their financial crisis and specifically in 1984. One of the major changes was the inclusion of the full sale price of construction and mining equipment the company purchased from Kobe Steel, Ltd and sold themselves. These sales aggregated $28.0 million in 1984. Another change the company made was the reduction in certain LIFO inventories which increased gross profit by $2.4 million in 1984. The company also was able to lower its manufacturing costs largely in part due to a reduction its pension expenses, which ultimately improved its gross profit. Lastly, the company changed its depreciation method from accelerated to straight line resulting in an $11 million increase in income in 1984. What do you think are the motives of Harnischfeger’s management in making the changes in its financial reporting policies?...
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...revitalize the county. This includes the $250.5 million transformation of Jack Kent Cooke Stadium (now FedEx Field) and the massive $2 billion National Harbor project in Oxon Hill, MD[i]. There are rumors the county plans to rename the crime-infested city of Landover, where I currently live, to Hyattsville, a neighboring city, predicting that this will ease the bad repetition of this area. However, these renovations and changes are only temporary solutions since they are only masking the problems that put my home county deeper in debt. Crime and drug trafficking is still on the rise. People are still losing their homes and debt is at an all-time high. The permission of choosing my CAFR allowed digging deeper into this growing problem by discovering who regulates drug and crime programs, the debt position, and other municipals relating to the well-being of my hometown. In this paper, I will address the crisis relating to a nonmajor governmental fund program designed to aid in the decline of crime and drugs and the recent trend relating to pension debt and the tax debt of the general, agency and enterprise fund. The drug and education program are vital in PG based on four fund comparisons on two statements. According to PG CAFR in the Combining Statement of Balance Sheet- Nonmajor Governmental Funds (balance sheet) and the Combined Statement of Revenue, Expenditures and Changes in Fund Balances-Non Government Fund (Statement of REC), the county had total assets of $6, 961, 225...
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...Progression of the European Debt Crisis 5 5.1 Greece 6 5.2 Portugal 6 5.3 Italy 7 5.4 Spain 7 5.5 Ireland 8 5.6 Iceland 9 5.0 Measures Taken (so far) to Combat the Debt Crisis (European Level) 10 6.7 European Financial Stability Facility (EFSF). 10 6.8 European Financial Stabilization Mechanism (EFSM). 10 6.9 ECB interventions. 10 6.10 Brussels Agreement. 11 6.0 Implications of the European Debt Crisis: For the European Union 12 7.0 Implications of the European Debt Crisis: For the Global Economy 13 8.0 Implications of the European Debt Crisis: For Global Politics 14 9.0 Implications of the European Debt Crisis: For Pakistan 15 10.0 Implications of the European Debt Crisis: For the Welfare State 16 11.0 Solutions for the European Debt Crisis 16 12.11 Eurobonds. 16 12.12 Restructuring of Eurozone. 18 1.0 Overview: With a nominal GDP of $16,242 Billion in 2010 (20% of global GDP), the European monetary union is not only the world’s largest economic block, but also the foremost integrated economic and political association of nations in history. The economic crisis the Euro Zone currently faces is unique in all of its aspects. While, like all financial disasters, it cannot be traced back to just one precipitating event or factor, the spread and evolution of this crisis has charted an unprecedented...
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