Pensions, Purchasing-Power Risk, Inflation and Indexation [E-Book] / Edward Whitehouse
The rapid rise in inflation in 2006-07 has attracted attention – once again – both to how pensions systems should react to changes in prices, and to how they do so in practice. Although inflation is now falling as a result of lower commodity prices and weakening demand, this brings with it the risk...
Saved in:
Full text |
|
Personal Name(s): | Whitehouse, Edward. |
Imprint: |
Paris :
OECD Publishing,
2009
|
Physical Description: |
41 p. ; 21 x 29.7cm. |
Note: |
englisch |
DOI: |
10.1787/227182142567 |
Series Title: |
/* Depending on the record driver, $field may either be an array with
"name" and "number" keys or a flat string containing only the series
name. We should account for both cases to maximize compatibility. */?>
OECD Social, Employment and Migration Working Papers ;
77 |
Keywords: |
Social Issues/Migration/Health |
The rapid rise in inflation in 2006-07 has attracted attention – once again – both to how pensions systems should react to changes in prices, and to how they do so in practice. Although inflation is now falling as a result of lower commodity prices and weakening demand, this brings with it the risk of deflation – falling prices – which also raises questions as to how pension systems should react. Most OECD countries have a legislated commitment to indexation of pensions in payment. However, the empirical evidence in this paper shows that these rules have frequently been over-ridden. Furthermore, because indexation to price inflation rather than wage inflation is much more common – and wages can be expected to rise more rapidly than prices – the effect of following legislated indexation rules will be to reduce pensioner incomes compared with those of the working-age population. However, indexation to prices is less costly, allowing a larger initial pension than under earnings indexation for a given budget constraint. This paper sets out current, national indexation policies and historical data on how pensions have been adjusted in practice. It examines different indexation policies: to prices, earnings or a mix of the two; the choice of the price index and progressive indexation (where smaller pensions are increased more rapidly than larger). |