COVID and Pension Planning Worldwide 3

 In an interesting article in the Asia Pacific Forum, Odusote Fatimah Abolanle and Alfred Muluan Wu write.

Many governments have also introduced subsidized pensions for a specific group of workers who registered under the pension scheme. In India, the central government was willing to contribute 24 percent of the salary of employees working in firms with up to 100 workers for three months.

 COVID-19 has laid bare the persistent gap in pension coverage, especially in low and middle-income countries where the working population is mainly in the informal sector. There is a clear need to create a non-contributory system in such a climate, or at least to extend its coverage to cater for those in the self-employed or informal sectors, to improve social protection and prepare workers for retirement.

 The hard truth is social security pension systems are still mainly the business of government, requiring strict monitoring, regulation, and support by the state, especially in developing countries. While COVID-19 has spurred several countries to make temporary adjustments to pension schemes, in the post-COVID-19 era all governments will have to conduct a thorough review of their pension systems to fix the endemic problems that exist.

 In doing so, policymakers will have to answer a number of critical questions. In addition to benefiting from public-private partnerships, the role of the state in providing pensions should be rethought. Policymakers should resist popular discomfort with increasing spending on retirement income protection, and acknowledge its many benefits for society and the economy.

 While much is up in the air for pension policy, one thing is certain. In the wake of COVID-19’s economic shockwaves, the adequacy and sustainability of pension schemes must be protected and extended, and policymakers must do everything they can to make that happen.

COVID and Pension Planning Worldwide 2

 In an interesting article in the Asia Pacific Forum, Odusote Fatimah Abolanle and Alfred Muluan Wu write.

The COVID-19 pandemic has complicated pension reforms in many countries. Worse yet, recent reforms in some countries put them at risk of further harm in the event of a another catastrophe like COVID-19.

For instance, a recent wave in pension schemes in many regions of the world shifted the risk and financial burden to employees and erased the state support system. In a normal environment this would already put employees at risk, but in a pandemic, it has been a disaster for inequality. Further, the vulnerability of low-income earners in the informal sector, especially in developing countries, has risen, compounding this global problem.

To deal with the impacts of COVID-19, many countries have had to create buffering mechanisms within the existing pension systems to alleviate the pains of its workforce. Some of these responses include allowing an early withdrawal of pension contributions, a reduction or deferral of contributions by employees and/or employees, provision of a subsidised pension, and the provision of a non-contributory pillar for unemployed.

For instance, the early full or partial withdrawal of pension contributions was initiated by Ghana for the self-employed and people who have permanently lost their jobs, and in India for those that are ill or have lost their job. Similar provisions have also been implemented in Australia, Malaysia, and Iceland.

In some countries, governments enacted policies to reduce or defer the contributions by workers to their pension account. In Thailand, social security contributions by employees – and also for employers – were reduced from five to four percent.

In India, those earning a basic salary of 15,000 rupees (approximately $280) per month will contribute 10 percent, rather than 12 percent of their monthly salary to the Employee’s Provident Fund from May until August. But those working with the central government were exempted.

In Malaysia, the mandatory monthly contribution to the Employee Provident Fund (EPF) by workers were reduced from 11 percent to seven percent.

Some governments have temporarily postponed or reduced pension obligations by employers in an attempt to mitigate the negative impact of COVID-19. For instance, the People’s Republic of China allowed for deferral or reduction in the employer contribution rate, depending on the location of the company within China, the size of the company, and the sector.

Vietnam also announced the suspension of mandatory contributions by some enterprises experiencing difficulties with COVID-19, based on the degree to which they are affected.

 The French government announced the deferral of social security and retirement contributions from May

COVID and Pension Planning World Wide 1

In an interesting article in the Asia Pacific Forum, Odusote Fatimah Abolanle and Alfred Muluan Wu write.

With the COVID-19 pandemic grinding almost every sector of the global economy to a standstill, many governments have had to reform policy to buffer the health and economic shocks their citizens are going through, including pensions and social security.

This unprecedented paradigm shift has exposed existing gaps in pension policies. Although some principles related to pensions, namely adequacy and sustainability, have been widely acknowledged, difficulties have been lingering around the direction of pension reforms amidst this unprecedented challenge.

Governments across the region should be careful about making changes to pension systems in the wake of the pandemic’s heights.

 In general, pension schemes are intended to provide consumption smoothing, insurance, and poverty relief for the elderly. In essence, they serve as income security for older people, and prevent poverty and reduce inequality in later life. Pension systems go beyond offering protection to senior citizens but also serve to reduce the financial burden on the governments, in particular in health and aged care.

Intriguingly, global pension systems have undergone significant transformation and adaptation and most pensions have evolved.

The most recent wave of pension reform started from Latin America and Eastern Europe, and gradually diffused to other parts of the world. The wave saw a shift from defined benefit, pay-as-you-go (PAYG), publicly administered pensions to a privately managed, defined contribution systems.

However, this is just one solution. While the World Bank and the International Labour Organization have proposed their own models, the kind of pension system applicable in different nations should ideally depend on social and cultural factors, and the unique composition of a country’s citizenry and workforce.

Hence, pension systems ought to vary from country to country, and be uniquely tailored to achieving the intended objectives of a government while also abiding by the overall principles of adequacy, sustainability, and integrity.

Generosity

 Generosity is not something that comes easily to many. We become trapped in our own circle and as we age, some of us begin to focus inward. We do not focus on the greater good, but on the greater good for us or those close to us. We think we are generous because we help close family and those who are part of our tribe. We also ignore or complain about the ungrateful people we have met. We may believe that the ungrateful person you met is the norm for the group they are associated with, and we begin to exercise caution and that can make you ungenerous. In your desire to avoid ungenerous people, you become less generous yourself and so lose out on the benefits of being generous yourself. 

I suggest it is better, however, to get no return than to confer no benefits. Even after a poor crop one, a farmer will sow again; for often losses due to continued barrenness of an unproductive soil have been made good by one year’s fertility. To discover one grateful person, it is worthwhile to be generous to many ungrateful ones. 

True generosity, Seneca argues, is measured not by the ends of the act but by the spirit from which it springs. He writes: 

Benefits, as well as injuries, depend on the spirit… Our feeling about every obligation depends in each case upon the spirit in which the benefit is conferred; we weigh not the bulk of the gift, but the quality of the good-will which prompted it. So now let us do away with guesswork; the former deed was a benefit, and the latter, which transcended the earlier benefit, is an injury. The good man so arranges the two sides of his ledger that he voluntarily cheats himself by adding to the benefit and subtracting from the injury.

 

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