Ageing and Pension Reform Around the World

Evidence from Eleven Countries

Edited by Giuliano Bonoli and Toshimitsu Shinkawa

This book comprehensively documents developments in pension policy in eleven advanced industrial countries in Western Europe, East Asia and North America. In order to explore what population ageing means for the sustainability of pension systems, the authors present a detailed review of pension policy making over the past two decades and provide up-to-date analysis of current pension legislation. They examine the factors that can facilitate or impede the adaptation of pension systems and the features that shape and determine reforms. They also highlight the fact that although the path of reform taken by each country is somewhat different, the processes at work are often very similar.

Chapter 11: Public Pension Reform in the United States

R. Kent Weaver

Subjects: economics and finance, public finance, politics and public policy, public policy, social policy and sociology, ageing, comparative social policy, economics of social policy


R. Kent Weaver1 INTRODUCTION Public pension programs in the United States, like most other advanced industrial countries, have been under severe pressures from an aging population, slower revenue growth and competitive pressures to limit payroll taxes. Policymakers throughout the industrialized world have drawn on a common repertoire of options to respond to these pressures. A first option is cutback on the generosity of specific benefit and/or eligibility provisions of their pension programs. These retrenchment options include increases in the retirement age, cuts in indexation of benefits for inflation and targeted reductions in benefits to upper-income recipients. A second set of options involve refinancing pension programs by, for example, increasing contribution rates, broadening the contribution base (for example, by requiring contributions above earnings ceilings for which no pension rights are accrued), adding more general revenues to finance the pension system, or devoting other dedicated taxes to the financing of pensions. Third, governments may attempt to restructure their pension programs in fundamental ways. For example, governments may scale back a ‘defined benefit’ pension tier, in which benefits are based on workers’ earnings history (usually for a specified number of years in which they have the highest earnings), and partially supplant those benefits with a new ‘defined contribution’ pension, in which workers each have their own individual pension account, and final benefits depend on contributions made to that account over the entire course of their working lives as well as the return on investments accrued in that account over time. Pension policymaking responses...

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