Pension Systems

Most current day workers receive meagre salaries, and are exposed to reducing benefits. The retirement package that most people used to receive in the past years has significantly changed. This has vastly been affected by the problem of unemployment and stagnation of wages. This in return has been known to drain a sizeable percentage of families living in the United States, concerning their capacity to save for their retirement. The replacement of those benefits that are said to be defined and are available to approximately 50% of the workers in the United States, is governed by contribution plans that could be considered as being defined and rely on the variability of the market’s contribution. This has resulted into the reduction of the pension gain, making it less reliable. The increment of cost of healthcare has also significantly affected the retirement security.

The retirement benefits and pension plans are among the actual crisis in the retirement security in America. Policies created should work a long way in reversing the policies that have been place in the past 30 years; these policies have been known to undermine the retirement security in America. It is essential to note that access to proper healthcare will eventually reduce, as it becomes an out-of-pocket cost for those benefiting from it. Currently, approximately 16% of income obtained by those who are above 65 years, increase with deductions to Medicaid and Medicare. This out-of-pocket cost is expected to rise and attain 30% of the average dependant’s gains by the year 2030, as escalating Medicare premiums and other deductions are obtained from Social Security checks.

The heights of economic problems that face those going on retirement have significantly risen over the last 30years. An analysis that was conducted by Demo Institute on Social Policy and Assets suggest that an approximate value of 78% of all elderly households have a financial problem and lack sufficient economic security, which would keep them forever. The prevailing recession that has resulted in increasing the stages of financial risk, by narrowing retirement risks through lowering of retirement investment accounts include the equity value at various homes (Robinson, 2007, p. 4).

In their bid to better the regulatory procedure, while at the same time making maximum utilization of its resources, many financial services are formulating a risk-based approach that would enhance close supervision of the available pension plans. The main aim is to decrease the existing risks that pension plan members are exposed to; for instance, some pension plan members end up not receiving the benefits that had been promised earlier. A good example of this financial service includes the Financial Services Commission of Ontario (FSCO). The first step that FSCO adopted was to implement and develop a program for monitoring the risks that crop up when it comes to funding a particular benefit pension plan (Gordon, 2002, p. 775).

The dropping of the equity market that has been in existence as from the mid-2000, and the reduction of rates of long term interest have amplified the members concern on the financial capabilities of the employed members who are under this pension plan and even the retirement security concerning the members savings. FSCO, shoulders the responsibility of extending its risk-based method, and at the same time, complement their existing overseeing of funding the pension plan through monitoring of the investment activities of the pension plan.

In the year 2002, FSCO come up with a project team that had the responsibility of developing a program of monitoring investments based on the existing risks. The main aim of this program was to promote stable governance in relation to the investments obtained from pension funds in order to gain security for members who are under this pension plan. After careful deliberations, it was observed that it was necessary to create an investment-monitoring model that would have the responsibility of monitoring the funding that is meant for a particular pension plan.

Improvement of retirement security is an individual’s responsibility through making sure that one can save and at the same time invest. As opposed to the existing argument, some people say that retirement security is only attainable through revision of trends that have been practiced for the last 25 years, and adopting a European model in which the government, and its employers have the responsibility of playing  particularly a crucial role. All these ideas have no economic feasibility for a bright future of the United States Social Security. It is evident that currently above income in baseline Social Security, the majority of Americans would only rely on their own savings for their retirement (McKinsey, 2000, p.14).

More than one-third of the American population experience many problems in their bid to search for a retirement saving plan. Today, approximately 40 million Americans have not yet accessed a workplace saving plan for their retirement. This has been brought about by the fact that numerous employers who normally own small businesses find it extremely cumbersome and costly to enrol their employees to this plan. It is extremely significant to note that having an access to retirement plans in workplaces is extremely crucial since this works as a positive impetus towards ones’ preparedness for his retirement. When people are given the correct information and encouragement concerning the significance of retirement plan, saving for retirement becomes easier.