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Speaker(s): Geoff Rashbrooke (Institute of Governance & Policy Studies, NZ)
Defined contribution schemes do not cause inequality; in their basic form, however, they do perpetuate it. Social security arrangements are generally redistributive; their aim is to ensure that all citizens are able, at least at some basic level, to participate in their society, regardless of their individual means. Where defined contribution arrangements are utilised by governments for delivering social security, notably for retirement support, this perpetuation of inequality may not be optimal in terms of outcomes.
This work has two principal sections. In the first section, the presenters look at data from the Fiji National Provident Fund (the Fund), a mandatory defined contribution scheme that covers all employed workers in Fiji, to demonstrate the uneven outcomes that arise.
In arrangements where some access to defined contribution savings is available to members for ancillary purposes such as medical treatment, housing, education, and unemployment, this risks being drawn upon proportionately more by the poorer members, who have no other resources, thus further diminishing their retirement provision. In the last few years the Fund made a significant change towards greater preservation of retirement benefits, and we investigate the extent to which this is improving retirement savings for those at the lower end of the scale. In the second section the presenters discuss modifications to basic defined contribution schemes that would introduce some redistributive elements, and provide projections of the impact this could have, again by reference to the Fund.