Retirement – Page 3 – Actuarial News

You Might Live Longer Than You Think. Your Finances Might Not.

March 6, 2023March 6, 2023 Mary Pat Campbell

Link: https://www.wsj.com/articles/death-finances-and-how-many-of-us-get-our-money-needs-wrong-51a660a2?st=latmuov31yafzz9&reflink=desktopwebshare_permalink

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Demographers and actuaries make the following distinction between life expectancy and longevity: Life expectancy refers to the average number of years someone will live from a given age, whereas longevity refers to how long he or she might live if everything goes well, typically expressed as the probability of living beyond a certain age such as 85, 90 or even 100.

A growing body of evidence shows that many people are ignorant of their so-called longevity risk—the probability of living a very long time—and the complications that presents.

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Drs. Hurwitz and Mitchell note that retirement calculators provide information about average life expectancy, but not longevity. They have found that about five times as many Census Bureau publications relate to life expectancy as longevity. Thus, people who have planned appropriately for their life expectancy might miss how likely they are to live longer.

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People can look up their longevity risk with an online Longevity Illustrator maintained by the American Academy of Actuaries and Society of Actuaries, based off the latest mortality data from the Social Security Administration.

Author(s): Josh Zumbrun

Publication Date: 10 Feb 2023

Publication Site: WSJ

EBSA Secretary Defends ESG Rule as Legislative, Litigation Battles Continue

February 13, 2023February 13, 2023 Mary Pat Campbell

Link: https://www.ai-cio.com/news/ebsa-secretary-defends-esg-rule-as-legislative-litigation-battles-continue/

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The Department of Labor’s assistant secretary of labor for employee benefits security, Lisa Gomez, defended the DOL’s final rule allowing the consideration of ESG factors in retirement plan investments at a webinar hosted Monday by Ceres, a sustainability advocate.

The rule, which took effect on January 30, permits, but does not require, the use of ESG considerations in investment selection by retirement plan fiduciaries. There is a pending lawsuit in Texas challenging the legality of the rule.

Gomez explained that this rule is “not a per se requirement” to use ESG and clarifies that ESG factors may be considered as part of a fiduciary’s ordinary risk-return analysis. She also explained that this new rule does not allow fiduciaries to sacrifice the financial health of a plan to pursue other goals: A fiduciary may consider the risks and opportunities of climate change and other ESG factors.

Gomez dubbed the rule “a return to neutrality.”

According to Gomez, the previous rule, passed during the administration of President Donald Trump, which required only “pecuniary factors” to be used in investment selection, had a “chilling effect” on the consideration of ESG factors. Gomez said the word “pecuniary” neither appears in the text of the Employee Retirement Income Security Act, the governing statute for both rules, nor does it occupy a “long-standing place in employee benefits law.”

Gomez briefly discussed one of the more nebulous provisions of the new rule when she said participant preferences for investments can be considered in menu selection on the grounds that it can increase plan participation and deferral rates, thereby increasing retirement security. She did not comment on how fiduciaries should determine adequate participant interest or how much economic gain could be compromised in exchange for increased participation, if any.

Eric Pitt, a climate finance consultant at Ceres who moderated the webinar, asked Gomez how a fiduciary should consider a hypothetical ESG large-cap stock fund for a plan menu: Should the fiduciary compare it to other similar ESG funds or the entire universe of large-cap funds? Gomez answered that there is no special treatment for ESG funds, and a fiduciary should look generally at the risk and return for any and all large-cap equity funds available, whether they use ESG considerations or not.

Despite the branding of the rule as neutral, Republicans in Congress have increased their organized opposition to the use of ESG considerations in retirement-plan investing.

Representative Patrick McHenry, R-North Carolina, chairman of the House Financial Services Committee, announced the creation of a “Republican ESG working group” on Friday. The purpose of the working group is to “combat the threat to our capital markets posed by those on the far-left pushing environmental, social, and governance (ESG) proposals.”

Author(s): Paul Mullholland

Publication Date: 6 Feb 2023

Publication Site: ai-CIO

Life expectancy assumptions could fall by 6 months if CMI proposals adopted

February 10, 2023February 10, 2023 Mary Pat Campbell

Link: https://www.lcp.uk.com/media-centre/2023/02/life-expectancy-assumptions-could-fall-by-6-months-if-cmi-proposals-adopted/

Excerpt:

The CMI has issued its consultation to help shape the next version of its mortality projection model, which is used by the majority of pension scheme trustees and sponsors in setting their funding and accounting assumptions. The consultation focuses on how to respond to the very high mortality rates seen in England & Wales over 2022, to which the model is calibrated.

The CMI believe mortality in 2022 may be indicative of future mortality to some extent, unlike the exceptional mortality seen in 2020 and 2021 during the peak of the pandemic.

The key proposal is to give 25% weight to the 2022 mortality data. In the coming years, the CMI plan to steadily increase the weight on mortality data until around 2025, by which time it expects a clearer indication of mortality trends of the future. The CMI also intend to update the model to use the latest population estimates based on the 2021 Census.

Both of these changes reduce projected life expectancy relative to previous versions of the model.

Chris Tavener, Partner and Head of Life Analytics commented: “If these proposals go ahead then life expectancy assumptions at age 65 are likely to fall by around 6 months, equivalent to 2%, when adopting the new core model, all else being equal. This is a larger fall in life expectancies compared to recent model updates, but we share the concern expressed by the CMI that higher death rates seen in the latter part of 2022, and continuing into January, may be indicative of future mortality.

“We are seeing an increasing number of pension scheme trustees and sponsors look to us to understand how their own members are likely to be affected by the various factors driving recent higher death rates, such as the ramifications of the pandemic and pressures on the healthcare system, which in our view will affect some groups more than others.”

Publication Date: 1 Feb 2023

Publication Site: Lane Clark & Peacock

France Won’t Accept Emmanuel Macron’s Attack on Pensions

February 6, 2023February 6, 2023 Mary Pat Campbell

Link: https://jacobin.com/2023/02/france-emmanuel-macron-pension-reform-protest-strike-welfare

Excerpt:

According to police figures, Tuesday’s nationwide protests marked the largest single-day union-backed demonstration in France in thirty years. Some 1.272 million turned out to the streets. That’s more than the already-impressive January 19 turnout, it’s more than any of the single-day peaks of the 2010 and 2003 movements over retirement reforms — it even topped the height of the legendary 1995 protests.

And there’s more to come. The united union coalition has called for two further days of strikes and protest: Tuesday, February 7, and Saturday, February 11. “Until then,” the coalition has also called on the public to “multiply actions, initiatives, meetings, and general assemblies across the country, in workplaces [and] at places of study, including through strikes.”

After two successful national mobilizations, the movement seems to be entering a new phase. Public opinion is clearly on its side — and yet, the government isn’t budging on the proposed hike in the retirement eligibility age from sixty-two to sixty-four. Clearly, it’s going to take more for organized labor to win this battle.

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Clearly, the strike calls over pension reform have resonated beyond organized labor’s traditional bastions of support in the public sector: namely, schools, health services, and transit networks (the national SNCF rail company and the Paris metro network). Workers in all these sectors have walked off the jobs, but so have others in the private sector. The General Confederation of Labour (CGT) has shared a list of strikes on January 31 that illustrates this point: five thousand strikers at Airbus; a walkout from 90 percent of the staff at a FNAC department store outside of Toulouse; a strike from 80 percent of the workers at a LU Mondelēz factory in Normandy, etc.

Author(s): Cole Stangler

Publication Date: 2 Feb 2023

Publication Site: Jacobin

Why the French are protesting against pension reform

February 2, 2023February 2, 2023 Mary Pat Campbell

Link: https://www.dw.com/en/france-pension-reform-plans-trigger-public-backlash/a-64513082

Excerpt:

A reform of France’s pension system is set to push up the minimum retirement age from 62 to 64. The government has said the measures are needed. But most French, and even a number of economists, disagree.

The demonstration on a recent Thursday afternoon could be a bad omen for President Emmanuel Macron. About 80,000 people gathered in Paris, and over 1 million across France — more than at any other French protest in over a decade. They were there to show their opposition to the government’s pension reform plans, which even some economists disapprove of.

Protesters in the street leading from Place de la Republique to Place de la Bastille in northeastern Paris were holding up placards saying things like “I love my pension” and “This [reform] is not inevitable, it does not create social justice.”

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But the government has said the reforms are necessary to save France’s pay-as-you-go system, where workers pay for pensions through their levies. “The ratio of workers to pensioners is going down and that is threatening our system. With this project, we’ll guarantee the future of our retirement model,” Prime Minister Elisabeth Borne said before the Senate in mid-January.

As opposed to certain other European countries, France’s pension system does not include any capital-funded elements. It comprises general branches for private employees and public servants, and 27 so-called special pension schemes for, for example, ballet dancers or police officers that benefit from an earlier retirement.

The government now aims to increase the system’s overall minimum retirement age from 62 to 64 years by 2030. And from 2027 on, people will need to work for 43 years — instead of the current 42 — to receive a full-rate pension.

Macron’s plans would maintain an earlier retirement for people who started working at a young age and preserve certain special pension schemes. Others, such as the plans for metro drivers in Paris, are to be cut. The government also aims to increase the minimum pension by about €100 ($108) to €1,200 per month.

Money is, of course, Macron’s main argument. The reform is based on a report by a government-mandated expert committee that predicts pension payments will amount to up to 14.7% of GDP in 2032, instead of the current 13.8%.

Author(s): Lisa Louis

Publication Date: 30 Jan 2023

Publication Site: DW

France: Over 1 million march against raising retirement age

January 23, 2023January 23, 2023 Mary Pat Campbell

Link: https://apnews.com/article/france-retirement-age-limit-protests-866eb86aea5cf0d39894b96d2888c26f

Excerpt:

At least 1.1 million people protested on the streets of Paris and other French cities Thursday amid nationwide strikes against plans to raise the retirement age — but President Emmanuel Macron insisted he would press ahead with the proposed pension reforms.

Emboldened by the mass show of resistance, French unions announced new strikes and protests Jan. 31, vowing to try to get the government to back down on plans to push up the standard retirement age from 62 to 64. Macron says the measure – a central pillar of his second term — is needed to keep the pension system financially viable, but unions say it threatens hard-fought worker rights.

Out of the country for a French-Spanish summit in Barcelona, Macron acknowledged the public discontent but said that “we must do that reform” to “save” French pensions.

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In a country with an aging population and growing life expectancy where everyone receives a state pension, Macron’s government says the reform is the only way to keep the system solvent.

Unions propose a tax on the wealthy or more payroll contributions from employers to finance the pension system instead.

Polls suggest most French people oppose the reform, and Thursday was the first public reaction to Macron’s plan. Strikes severely disrupted transport, schools and other public services, and more than 200 rallies were staged around France.

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Under the planned changes, workers must have worked for at least 43 years to be entitled to a full pension. For those who do not fulfil that condition, like many women who interrupted their career to raise children or those who studied for a long time and started working late, the retirement age would remain unchanged at 67.

Those who started to work under the age of 20 and workers with major health issues would be allowed early retirement.

Protracted strikes met Macron’s last effort to raise the retirement age in 2019. He eventually withdrew it after the COVID-19 pandemic hit.

Retirement rules vary widely from country to country, making direct comparisons difficult. The official retirement age in the U.S. is now 67, and countries across Europe have been raising pension ages as populations grow older and fertility rates drop.

Author(s): SYLVIE CORBET and JADE LE DELEY

Publication Date: 19 Jan 2023

Publication Site: Associated Press

Millions march in France against Macron’s pension cuts

January 23, 2023January 23, 2023 Mary Pat Campbell

Link: https://www.wsws.org/en/articles/2023/01/20/fxax-j20.html

Excerpt:

Two million people struck or marched in protests yesterday called by union federations against President Emmanuel Macron’s pension cuts. Polls show around 80 percent of the population oppose the cuts, which would increase the minimum retirement age to 64 with a minimum pay-in period of 43 years. Strike calls were widely followed by rail and mass transit workers, school staff, and electricity and refinery workers, and 200 protest marches were held in cities across France.

Trade unions reported that 400,000 people marched in Paris, 140,000 in Marseille, 38,000 in Lyon, 60,000 in Bordeaux, 50,000 in Toulouse and Lille, 55,000 in Nantes and 35,000 in Strasbourg. Moreover, many smaller cities saw large turnouts that surprised police authorities. There were 25,000 in Orléans, 21,000 in Le Mans, 20,000 in Nice, 19,000 in Clermont-Ferrand, 15,000 in Tours, 13,000 in Pau, 10,000 in Chartres, 9,000 in Angoulême and 8,000 in Châteauroux.

Author(s): Alex Lantier, Anthony Torres

Publication Date: 20 Jan 2023

Publication Site: World Socialist Web Site

Pensioner at 43? Turkey introduces Early Retirement

January 6, 2023January 6, 2023 Mary Pat Campbell

Link: https://www.novinite.com/articles/218274/Pensioner+at+43%3F+Turkey+introduces+Early+Retirement

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Over 2 million Turks will be able to retire at any time as long as they have worked for at least 7,200 days. Critics warn of the dangerous consequences of this pre-election move by President Erdogan, writes Deutsche Welle.

The door of the Pension and Social Security Office in Istanbul’s Unkapani district is locked. However, a long line has formed on the sidewalk in front of it – people are waiting for the lunch break to end.

The 49-year-old toy seller Murat, who is among those waiting, started working at the age of 13. Now he wants to know if he can retire immediately. “Actually, 49 is too early,” he admits. “But if the state gives you such an opportunity, you should take advantage of it,” he adds.

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Similar queues are currently being seen in many places after President Recep Tayyip Erdogan announced that the minimum retirement age would be abolished. According to him, this will affect about 2 million people. Until now, women had the right to retire at 58 and men at 60. From the middle of January, only the time worked will be taken into account. This means that 7,200 days of service will qualify for retirement.

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Another problem is that the earlier people receive pensions, the earlier they stop making contributions to the insurance system. So it is in danger of collapsing in the long term, says the woman, who did not want to be named. “This is at the expense of future generations,” economist Senol Babuscu told Turkey‘s Karar TV. “How much damage we are doing to future generations remains to be seen.”

The upcoming costs of the Turkish state are also not yet known. But the Labor Minister predicted the bill would come out to at least €5 billion.

Publication Date: 4 Jan 2023

Publication Site: novinite.com

South Korea spent $200 billion, but it can’t pay people enough to have a baby

December 5, 2022December 5, 2022 Mary Pat Campbell

Link: https://www.cnn.com/2022/12/03/asia/south-korea-worlds-lowest-fertility-rate-intl-hnk-dst/index.html

Excerpt:

South Korea recently broke its own record for the world’s lowest fertility rate. Figures released in November showed the average number of children a South Korean woman will have in her lifetime is down to just 0.79.

That is far below the 2.1 needed to maintain a stable population and low even compared to other developed countries where the rate is falling, such as the United States (1.6) and Japan – which at 1.3 reported its own lowest rate on record.

And it spells trouble for a country with an aging population that faces a looming shortage of workers to support its pension system.

Author(s): Paula Hancocks

Publication Date: 3 Dec 2022

Publication Site: CNN

Impact of COVID-19 on Defined Benefit Pension Plan Funding

November 17, 2022November 17, 2022 Mary Pat Campbell

Link: https://www.theactuarymagazine.org/impact-of-covid-19-on-defined-benefit-pension-plan-funding/

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Higher interest rates already have translated into higher discount rates for solvency and accounting valuations, which means good news (lower liabilities) for DB pension plans. The sensitivity of a pension plan’s liabilities to the discount rate used to determine their value depends on the demographics of the plan members, the type of valuation and level of discount rates being used. Generally, the “duration” for most pension plan liabilities (defined here as the percentage decrease in liabilities for a 1% increase in discount rates) will range from 10 to 25.

In the United States, the average accounting funded ratio increased from 94.6% in July 2021 to 104.5% in July 2022, according to the Milliman 100 Pension Funding Index, despite significant decreases in plan assets during that time. This is because the average accounting discount rate (typically based on long-term, high-quality bond yields) increased from 2.59% to 4.25% during that same period, driving down accounting liabilities at a faster pace than asset losses. Figure 1 demonstrates this effect in more detail.

Author(s): John Melinte

Publication Date: November 2022

Publication Site: The Actuary at SOA

2021 Risks and Process of Retirement Survey

November 7, 2022November 7, 2022 Mary Pat Campbell

Link: https://www.soa.org/resources/research-reports/2021/retirement-risk-survey/

Full report: https://www.soa.org/48fd8a/globalassets/assets/files/resources/research-report/2021/risks-retirement-findings.pdf

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CHAPTER HIGHLIGHTS:
• Despite the COVID-19 pandemic, level of concern about various risks remains historically low this year for both pre-retirees and retirees. Compared to 2019, level of concern dropped on some issues for retirees. As a result of this drop, retiree concerns are lower than those of pre-retirees by a larger gap than ever before.
• The one exception to this trend was concern about fraud. In 2021, both retirees and pre-retirees were
more concerned about fraud, and it is the highest concern among retirees, particularly Black/African
American retirees. As in prior studies, those with lower income tend to show much higher levels of
concern.
• The biggest concerns for pre-retirees are their savings and investments not keeping up with inflation, not being able to afford long-term care, not being able to afford health care costs, not being able to maintain a reasonable standard of living throughout retirement, and potentially depleting all their savings.
• While half of pre-retirees plan to retire gradually rather than all at once, retiree respondents indicate this
seldom actually happens. Higher-income pre-retirees are more likely to plan to go straight from full time
employment to retirement.
• The COVID-19 pandemic has not affected plans that pre-retirees have for work, living arrangements, and
lifestyle in retirement, although over a quarter report changing their lifestyle.
• Despite the financial challenges that retirement poses, most do not have financial advisors, especially preretirees, lower-income respondents, and Black/African American respondents.

Author(s): Greenwald Research

Publication Date: February 2022

Publication Site: Society of Actuaries