John Bowman’s ‘Capitalisms Compared: Welfare, Work and Business’

Chapter 3: Pension Policy

The Chapter’s Summary

To stop people from being poor as they get older, pension policies were put in place. Instead of leaving retirees to rely on their families and communities, these policies made sure that retirees were well taken care of. Pension plans can be funded by the government or by the people themselves. Government pension policies are given to retirees by the government and come from current employees and employers. Funded pensions are offered by private insurance sectors and come from a retiree’s savings (Bowman, 2013). Pay-As-You-Go: People like the government’s pension policies because they don’t have to worry about inflation when they get their money and include a lot of other benefits, like insurance (Bowman, 2013). Among other things, the PAYGO Social Security policy in the United States gives medical insurance to beneficiaries and pays their families when they die (Bowman, 2013). However, public pensions are criticized because they require more money from people and more money from the government. Some income inequality is caused by a PAYGO system because it encourages income-based compensation.

Funded pension policies are popular because they make it easier for people to have equal incomes and make them more socially responsible. As opposed to public policies, private pension policies are paid out of one’s own savings, which gives retirees more confidence to ask for their money. However, private pension policies may make it hard for subscribers to get paid if there are changes in the way the country’s currency is used. Also, they don’t cover the beneficiaries’ families under one policy, either (Bowman, 2013). Social democrats have kept trying to improve different types of pension policies in an effort to make them work better. For example, the German earnings-based pension policy has had a lot of changes made to the retirement ages and the way benefits and contributions are calculated. Germany has a PAYGO pension policy that social democrats are still trying to change. They want to keep contributions at 22% and below (Bowman, 2013).

Sweden went from the ATP pension policy to a PAYGO pension plan that was funded by both employers and employees (Bowman, 2013). A lot of money came from the employees of ATP, which needed to be changed. There are both public and private pension policies in the United States. Despite the fact that social security provides extra benefits like insurance and family compensation, many Americans have their own pension plans, which makes the public pension policy only 35% effective in benefiting retirees. Comparisons of the three countries’ pension policies show that the popularity of private pension plans in the United States has cut Social Security’s ability to replace income for retirees to just 35%. The United States pension policy has separate operations for the private and public sectors. They have been able to keep 75 percent and 70 percent of their retirees’ income replacement abilities because private accounts were put into their public pension systems (Bowman, 2013).

A response to the Chapter’s main point

The argument in this paper is very important to understanding where the money for pension payments comes from. It’s common to think that public pensions are paid for by taxing workers’ savings, but that’s not true. It’s also said in this chapter that pensions are paid for by current employees’ contributions to retirees who have already died (Bowman, 2013). Then, the current employees are made by the work of young employees who will take their places when they retire. As a result of this, Sweden’s PAYGO pension policy doesn’t have a set amount. Employees are made to think that their contributions are savings that they can enjoy in the form of a pension when they are old enough. Indeed, the issue of pension policies is a political one that needs to be looked at on a regular basis.

As this chapter has shown, the goal of promoting effective and reliable pension policies in different policies is to make sure that the elderly and their families have a good future without putting too much stress on them. Ensuring that these policies are in place means changing the rules so that employees pay less and have more of a say in how the elderly are cared for. The Swedish government’s policy could change again as long as it doesn’t raise taxes above 22%. (Bowman, 2013). Poor growth in many countries is to blame for the increased spending on pension funds, which means that employees should pay more to cover the costs.