Edited by Paolo Onofri
Chapter 6: Asset accumulation and retirement income under individual retirement accounts: evidence from five countries
6. Asset accumulation and retirement income under individual retirement accounts: evidence from ﬁve countries Gary Burtless* 1. INTRODUCTION As populations in rich countries grow older, the cost of paying for public pensions has risen, boosting tax burdens and placing increased pressure on government budgets. Only one of the seven largest industrial countries, the United Kingdom, has overhauled its public pensions in a way that is likely to hold down future pension spending so that it does not increase sharply relative to national income. The favorable outlook for public spending on British pensions is the result of policies that tightly restrain the growth of basic government pensions and encourage active workers to abandon the second-tier, earnings-related public program in favor of private pensions. Future retirees are expected to derive much more of their retirement income from privately managed and invested pension accounts than from publicly ﬁnanced, pay-as-you-go pensions. Other leading industrial countries still face major challenges in paying for or fundamentally reforming their main public pension programs (Bosworth and Burtless 1998). Policymakers in several rich countries show interest in following the British example and replacing part of their public systems with private pensions organized around individual retirement accounts. In May 2001 the German government revised Germany’s national pension system to curtail the future growth of publicly provided pensions and to subsidize the creation of new deﬁned-contribution pensions based upon individual accounts. In June 2001 the upper house of the Japanese legislature gave ﬁnal approval to the government’s plan to o...
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