A government pension scheme policy helps the state's gross domestic product via taxation of pensioners while enabling its population to meet the basic needs and various wants. This policy is usually a state-owned policy that ensures persons working and living in a particular state get basic pay and minimum wage once they retire. The government scheme is one of the most significant functions of financial institutions being a social policy. Due to the resurging numbers of an aging population, a country's economy might become imbalanced if it does not design, plan, and formulate an adequate pension scheme policy (Lenney, Lutz, & Sheiner, 2019). An appropriate pension scheme should have a reliable standard security structure and a civic employee's retirement system. The two help ensure that both the employees and employer make periodic contributions to the state in each jurisdiction. However, in the recent past, private pension schemes have become common due to the increasing number of private firms and organizations. A state pension plan can incorporate private employees if only they make periodic contributions to a federal public security program that provides future retirement remunerations.
Brief History of the Pension policy
The provision of pension plans existed way before the declaration of independence in the United States of America. The retirement problem was a menace that even caused depression in people, reducing the state workforce's productivity rate. A pension policy was mainly formulated for war veterans or set up as benevolent initiatives by religious communities (Berry, 2016). During the early 18th century of American History, Congress formed a bureau that handled pension. The administration of pension was later transferred to the state department of interior and national government coordination before 1850. A general law on the pension system was later established by congress. A defined benefit system policy was later implemented and saw retirees guaranteed a payout once they retired from offering services.
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Policy Alternatives
Provision for optional alternative pension contributions for employees is mainly due to the introduction of tax rates to pensioners. Such has created a diversity in the search for better pension plans that are eligible for the working population. Melguizo et al. (2017) et al. depict that bounded by a rationality framework, employees can engage in alternative pension policies such as stock and shares, via save as you earn company schemes, and investing in property/real estate. Such alternative schemes might help one overcome the dangers of lacking funds during retirement. Some employees also sort of continuing to work even after attaining the age of 60years. However, through private arrangements, one can choose to open a private entity or work in the various online platforms available. Individuals should always have alternative pension saving schemes to avoid uncertainties and gaps during their old ages
Political Constraints on the Policy
There are political upheavals that engulf the pension policy, mostly in making an informed decision. At times, states are faced with rigid fiscal limitations, tough times of the economy, and income flow. The government of the day might be forced to manipulate the pension scheme plans to lower or tax the pension fund. Such has adverse effects on individuals receiving the fund making life unbearable and undesirable. Political constraints that might affect the pension policy include changes in the demographic and macroeconomics trends, political instability, and misinformed data regarding revenue allocation (Davis & Lastra, 2018). The pension policymaking process should include individuals with knowledge and experience in formulating a workable scheme one free from political constraints.
Unintended Consequences of the Pension Policy
States should try to introduce more protection for vulnerable groups such as that of the pensioners. The protection of pensioners should be so that they do not use all their retirement benefits in unprofitable deals that drain all their savings. Regulations on unintended consequences govern and protect the pensioner against exploitation by fraudsters. The regulations should be compelling to help retirees involve themselves in profit plow back projects. One unintended consequence is the third-party annuity transferals (Moizer, Farrar, & Hyde, 2018). Pensions come in lump sum amounts, and one might end up buying high-end goods like gold and expensive automobiles that will not lead to an investment. Pensioners should be advised against making such common mistakes. Persistent clients might also be tempted to pension freedom and withdrawing all cash or transfer their benefits from their plans or schemes. Such might promote the uneconomical use of funds rendering one bankrupt.
The Outcome of the Pension Policy
Effective and efficient pension policy is the value of its payback to the targeted population. It will lead to a retirement income provision, making it favorable for pensioners to enjoy happy retirement days. Social security for the target population is evident as security becomes the foundation for investments and savings to build and uphold (Block, 2010). It will also result in improved healthcare for the aging population as they are more prone to diseases. An increase in the number of savings accounts will be definite and will lead to an equilibrium in the economy due to the balance in payments of goods and services (Lenney, Lutz, & Sheiner, 2019). Such will also allow one to avoid penalties of a financial nature, allowing for more investments, for instance, in real estate and agriculture. A stable and reliable government pension scheme policy is a mandatory requirement for states that yearn for the economy's financial prosperity and equilibrium.
Conclusion
The combination of various policies will help a state formulate a flexible and workable pension scheme policy. Identifying policy problems is the primary duty of a state to commence a pension policy formulation (DiNitto & Johnson, 2015). The intended target population of the policy should be well defined and determined. The target population is usually the public employees who are eligible once they attain the maximum working age, mostly at 60 (Topa et al., 2018). Additionally, various states consider civil servants and collaborate with private entities to formulate private employers and employees' policies. Communication should always be useful as listening skills should always be embraced to ensure the policy's success. Policy proposals are vital, and this is usually done via policy-organizing committees that comprise of interest groups, governmental state departments, and various legislative bodies. A state should always be mindful of its population when planning for pension policy. Implementation of the policy should be guided by law and various acts that prevent public funds' embezzlement. The policy should also be evaluated and monitored to prevent a population's exploitation by corrupt policy schemes meant to loot from hard-working citizens.
References
Berry, C. (2016). Austerity, ageing and the financialization of pension’s policy in the UK. British Politics , 11 (1), 2-25. https://doi.org/10.1057/bp.2014.19
Block, W. (2010). Equal Pay, Discrimination, and the Glass Ceiling . YouTube. Retrieved July 30, 2020, from https://www.youtube.com/watch?v=LiaPCg0dIVk
Davis, E. P., & Lastra, R. M. (2018). Pension provision, lifetime financial sustainability, care, and dignity in old age: legal and economic issues. In The Home . Edward Elgar Publishing. https://bura.brunel.ac.uk/bitstream/2438/16307/1/Fulltext.docx
DiNitto, D. M., & Johnson, D. H. (2015). Social welfare: Politics and public policy (8th ed.). Pearson Education. pp. 421-470. https://www.vitalsource.com/products/social-welfare-diana-m-dinitto-v9780205959198
Lenney, J., Lutz, B., & Sheiner, L. (2019). The Sustainability of State and Local Government Pensions: A Public Finance Approach. https://www.ncsl.org/Portals/1/Documents/forum/Forum_2019/Sustainability_Government_Pensions.pdf
Melguizo, A., Bosch, M., & Pages, C. (2017). Better pensions, better jobs: status and alternatives toward universal pension coverage in Latin America and the Caribbean. Journal of Pension Economics & Finance , 16 (2), 121-143. http://www.bancaditalia.it/pubblicazioni/collana-seminari-convegni/2015-0019/PUBLIC-FINANCES-TODAY.pdf#page=119
Moizer, J., Farrar, S., & Hyde, M. (2018). UK state pension deferral incentives and sustainability. Applied Economics , 50 (21), 2356-2368. https://pearl.plymouth.ac.uk/bitstream/handle/10026.1/10375/UK%20State%20Pension%20Deferral%20Incentives%20and%20Sustainability%20-%20Moizer%20et%20al.pdf?sequence=3&isAllowed=y
Topa, G., Lunceford, G., & Boyatzis, R. E. (2018). Financial planning for retirement: A psychosocial perspective. Frontiers in Psychology , 8 . https://doi.org/10.3389/fpsyg.2017.02338
Verbič, M. (2019). Political economy of pension reforms: an empirical investigation. European Journal of Law and Economics , 47 (2), 171-232. https://www.researchgate.net/profile/Rok_Spruk/publication/329353904_Political_economy_of_pension_reforms_an_empirical_investigation/links/5c45a033458515a4c7356808/Political-economy-of-pension-reforms-an-empirical-investigation.pdf
