...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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...Pension Crisis Solutions 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...
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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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...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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...Will Greece survive the debt crisis once again? Problem Description Greece was on the verge of bankruptcy in 2010 due to the understatement of their deficit figure for years. They managed to survive this financial crisis with international bailout of 240 billion euros. Although bailouts did manage to provide some time to Greece to improve their financial position, but it came at huge expense. In order to improve the economy, it became necessary for Greece to reduce government spending and increase taxes. Consequences The international bailouts managed to delay Greece economic problem for few years but could not get rid of it completely. Moreover, the unemployment rate in Greece rose to above 25 percent during that time period. The bailouts money that supposed to improve Greece financial position was actually used to pay off debt. As a result, Greece economic situation never recovered and government still have to pay huge amount of debt to its creditors. Greece failure to reach an agreement with Europe to arrange money to pay off its debt could result in huge financial crisis and political changes in Greece as they may have to leave Eurozone and seek help from other countries. Some people believe that if Greece go bankrupt it would not have major economic impact on the Europe as it is just a small part of the euro economy and it would be better off to cut it loose. While, other argue that financial problem in Greece would have a major impact on the world and Europe specifically...
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...Article Analysis —— Pension and property?1 Written by ZOU Yue, DENG Ziqing, CHEN Mengfei Nowadays, the world is facing with a same question, aging population. As a following question, pension has caught world’s attention. Moreover, it seems that old pension policy cannot afford a comfortable retirement due to the rising house prices and inflation. Compared with pension, the article “pension or property – what’s the best plan for retirement” discussed a new way that some people may rely on for their retirement, which is investment in property. From the article, numbers of people decided to depend on property, buy-to-let properties or sell themselves-use properties, to provide an income for their retirement, rather than pensions as traditional. Because pension schemes with uncertain return would lock away their money until they are retired, and refund them with pool value at final. It is reasonable that pensions may have lower return than investment. We can get this conclusion by using a simple model. Suppose that an individual’s lifetime has two periods, then we denote rA as the annuity rate, rP as the yield rate of property, s1 means how much money the individual saves as pension, i means the amount of money individual invest in property, y1 is the income in period 1, c1 is the consumption in period 1. We have y1-c1= s, where s is equal to i. Therefore the individual will have the return on pension in period 2 which is s(1+r A), or have the return on property in period 2 which...
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...Questions for students 1. Exhibits 1 and 2 report the income statements and excerpts from the notes to Marks and Spencer’s financial statements for the fiscal years ending between March 31, 2005 and March 31, 2009. Critically analyze M&S’s accounting choices. What choices may have helped the company to overstate its net profits between 2005 and 2009? 2. Exhibit 3 provides information about the liability that Marks and Spencer reclassified as equity. Do you agree with the decision to reclassify? What will be the effect of this decision on future financial statements? Case analysis Question 1 Exhibit 2 shows various note disclosures related to Marks and Spencer’s accounting choices for non-current assets, leases and pensions. Following is a discussion of some of the accounting methods that Marks and Spencer may or could have used to boost accounting performance during the past years. Depreciation of fixtures, fittings & equipment Marks and Spencer’s depreciation policy for fixture, fittings & equipment is to depreciate the assets to their residual values over a period of 3 to 25 years. Although it may be difficult to evaluate whether the company’s useful life estimates are reasonable without more detailed information, the analyst can evaluate trends in depreciation expenses as a percentage of assets’ initial cost. TABELA It appears that Marks & Spencer gradually reduced its depreciation expense (as a percent of average cost) from close to 8 percent in 2006...
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...and Family Table of Contents Question A 3 1) Causes of Pension Crisis 3 2) “Money Purchase” Pension Scheme 4 3) Thinking about Pensions 4 Question B 6 Buy-to-let Property Investment 6 Question C 8 Question D 10 Importance of Writing a Will 10 Bibliography 13 Appendix I 14 Question A Causes of Pension Crisis Pension crisis refers to the difficulty predicted in settlement of pensions due to the difference that exists between the resources held by the pension and the obligations that are supposed to be paid by the pension. This means that the resources that have been set aside to pay for the pension obligations are not enough. The pension crisis is mainly caused by the factors explained below; Firstly, rapid growth of the ageing population as a result of couples postponing child bearing coupled with the general decline in the rate of birth per couple. Consequently, the working-age population decreases hence the taxes collected to cater for the pension payments. As a result the government system of pay-as-you-go becomes unsustainable. Secondly, the crisis is caused by longer lives of people sue to medical improvements thus consuming pensions for a longer time. Thirdly, a shift in prioritization of targets that are short-term like travel and purchasing of houses over planning for retirement among the young working population is also a cause for the pension crisis. Fourthly, the mounting pressure on governments for tax reduction and...
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...investors to the proposed changes to be made to the economy and also be able to make necessary arrangement to adapt to the policy. The 2012 pre budget proposed by the Chancellor is based on three key issues; the Personal Allowance Increase, which is meant for the aging population, an issue which has always been addressed from previous budgets. The purpose of the increase in Annual Investment Allowance is to support small and medium firms to boost production from £25,000 - £250,000 for just a short period of two years. Lastly, the pension savings allowance decrease, which the government aims to use for reducing its budget deficit by a quarter of a million pounds that would be of benefit on the long run. These subjects shall be addressed in details on how it would have an effect on the government, employees, employers, corporations, and pensioners because this change would either affect them positively or negatively. This change would be of benefit to the pension scheme on long terms basis based on the fairness of tax treatment for the basic taxpayers who would benefit £170 while the higher rate tax payers by £42.50, giving an estimate of 23.6 million taxpayers gaining from the reductions which would be discussed below. 2.0 Three Key Issues Addressed The Pre-Budget Review of 2012 presented by Chancellor of the Exchequer to the Parliament has proposed some changes in three key issues: Personal Allowance Increase The largest giveaway is the substantial increase in the personal...
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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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...EU insurance and occupational pension authority is a regulatory institution that was founded in jan 2011 with headquartier in Frankfurt am Mein. EIOPA replaced committee of European insurance and occupational pensions supervisors. During the fin crisis in 2007-8 the parliament called for a move towards more integrated EU supervision in case to be ensured a real level playing field for all actors at the range of the EU and to reflect the growth of fin.markets in the EU. As the result, the frameworks of the supervisory authorities became stronger to the risk rejection. The CORE responsibilities of EIOPA are the fin. System stability markets, fin products transparency, insurance policy holder protection. We can meet EIOPA in such fields as insurance, reinsurance, audit and etc. thus, the Authority through its actions have to be ensure the effective and consistent application of acts. The MAJOR GOALS are: - consumer protection and fin. System trust rebuilding; - coordinated EU supervisory response promotion; - coherent application of rules for markets and fin. Institutions across the EU. TO ACHIEVE THE GOALS authority granted the power to develop draft technical standards, regulatory and implementing issue recommendations and handbook guidelines to make decisions individually which address to authorities who are competent or to the fin.institutions. STRUCTURE 1. The major body that makes decision in the EIOPA is the BOARD of DIRECTORS which is composed with nonvoting and...
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...According to Ely (2008), “financial regulation is a form of supervision, which subjects financial institutions to certain requirements, restrictions and guidelines, aiming to maintain the integrity of the financial system. The regulatory body may be handled by either a government or non-government organization”. The Jamaican financial landscape consists of various financial institutions. These include banks, security brokers, pension schemes and insurance companies. The main objectives of the financial regulator are usually: • Market confidence – to maintain confidence in the financial system • Financial stability – contributing to the protection and enhancement of stability of the financial system • Consumers’ protection – securing the appropriate degree of protection for consumers. • Reduction of financial crime – reducing the extent to which it is possible for a regulated business to be used for a purpose connected with financial crime. With the objectives being outlined, the Bank of Jamaica is the Central Bank of Jamaica that carries out the government’s financial regulation and supervision pertaining to all banks’ operations. The Bank of Jamaica, established by the Bank of Jamaica Law (1960), began operations in May 1961. The establishment of the Central Bank was in recognition of the need for an appropriately regulated financial structure to encourage the economy’s development process after independence. Although the Bank of Jamaica carries out the financial regulation...
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...Running Head: Pension Plans Abstract The goal of pension plans is to provide a fixed income for individuals during retirement. In practice, this means either paying employees a fixed income when they reach a predetermined retirement age or can no longer work due to disability (Dessler, 2005, p. 492). However, since the 1980’s the number of employers offering pension plans has declined. Once considered a common benefit in the workplace and motivator for senior employees to remain with the organization, private pension plans has drastically dropped 74 percent (Carrell & Heavrin, 2007, p. 329). This research paper will first explain how pension plans are classified and then identify several reasons why pension plans has declined. Moreover, it will discuss which pension plans are in use today, and finally, what regulations govern pension plans. Private Pension Plans: America’s Vanishing Benefit When one company after another reneges on its pension obligation toward current and future employees, you know it’s going to get ugly. Just ask any veteran employee of a major airline who may only receive half the value of his/her pension upon retirement. Walsh (2004) reported that United Airlines’ pension payment debt nearly topped $23.4 billion along with another $1 billion for retiree health care benefits (para. 11). In other words, pension payments have the potential to basically bankrupt an industry. How should companies challenge the rising cost of retirement...
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