Book Review: Pensions: Challenges and Reforms

AuthorChristopher Prinz
Publication Date01 December 2004
SubjectBook Review
Einar Overbye and Peter A. Kemp (eds.)
Pensions: Challenges and
, Aldershot and Burlington: Ashgate, 2004, 234 pages,
ISBN 0 7546 3998 3
This collection of papers originates from the FISS conference held in
Sigtuna (Sweden) in June 2002. It is the ninth volume in a series of
international studies of social security. Pension reform, the subject of this
book, has become a pressing issue in many OECD and non-OECD countries
around the world. Countries tend to face similar demographic and
economic challenges, even if the timing and the extent of the challenge
may vary. Responses, however, have been rather different, with some
countries so far having resisted major reform and others having chosen to
overhaul their system completely. The latter is particularly true for many
countries in Latin America and Central and Eastern Europe.
As the editors argue in their introduction, probably the biggest challenge for
pension policy makers today is ‘how to limit the estimated rise in public
pension costs without increasing the percentage of pensioners living in
poverty’. Indeed, the significant reduction in poverty rates among the
elderly population has been a major achievement (if not the major
achievement) of social policy in developed countries in recent decades.
(One consequence of this is that nowadays poverty issues are increasingly
discussed in relation to children and youth, but that is another story). With
future population change, this accomplishment may be difficult to sustain.
Various challenges are related to this key problem, including the issues of
widespread early retirement, increasing pension inequality and increasing
labour market flexibility. The various chapters of this book address many of
these issues from different angles and for different (groups of) countries.
The book is structured in three parts. The two papers in the first part deal
with economic incentives for early labour market exit – one of the factors
responsible for the low average retirement age in many countries. Using an
adaptation of the option value model of Stock and Wise to estimate
retirement incentives, Richard Blundell concludes that the incentives to
retire early are still considerable in the UK. He also shows that supply-side
policies would be quite effective: merely shifting the statutory retirement age
by three years would move the retirement peak to a later age and
significantly cut the incidence of early retirement, while a more compre-
hensive supply-side policy package would even result in a smooth and lower
rate of exit into retirement at all ages. Tuulia Hakola and Roope Uusitalo
look at employer interests in the retirement process and at financial
European Journal of Social Security, Volume 6 (2004), No. 4 391

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