Abstract
Inevitably, there has been considerable disagreement around the substance of the laws and institutional arrangements that are compatible with desert. To the limited extent that they endorse the desert principle, classical liberals insist that voluntary exchange is sufficient to ensure that market actors are appropriately remunerated for their contribution to production. Egalitarian liberals reject this assertion, insisting that the market is suffused with asymmetries of power and opportunity that diminish individual capacities to be deserving. Acting on this perception, our analysis evaluates several models for the design of the second pillar pension arrangement. Only defined benefit pensions have the capacity to ensure a consistent relationship between work and savings effort, and flows of retirement income.
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Notes
- 1.
“Pre-institutional desert” refers to desert claims that are based on some prior normative imperative, independently of the institutional arrangements in which desert claims arise. By contrast, and as the designation suggests, “institutional desert” is an artefact of institutional arrangements (Olsaretti 2004, 2007).
- 2.
This may be because a scheme has been improperly managed by its sponsors, or any other authorised decision makers, or because managers have acted in a fraudulent way (Blake 2006).
- 3.
Which could be more than 45 years, given evidence of increased life-expectancy (Macnicol 2015).
- 4.
Under “pay-as-you-go” (PAYG) financed retirement schemes, benefits are paid for by imposing a social security tax on workers, with the expectation that they will be similarly supported when they reach retirement (Hyde and Borzutzky 2016).
- 5.
When legal scholars discuss “property”, they are referring to a bundle of rights defined by law, not physical objects. If there are no rights, there is no property (Rounds 2004).
- 6.
It may be difficult to assign responsibility for deficiencies that result from market-driven fluctuations of investment income, or growing life-expectancy.
- 7.
Under conditions of uncertainty, where an array of causes are equally probable (or difficult to disentangle), a default rule of “equality” minimises “the maximum possible injustice done to any one individual” (Miller 1999, p. 235).
- 8.
Socialist-collectivists regard DB pensions as a means of vertical income redistribution, transferring financial resources from employers to workers, and statutory measures to share the costs of pension financing are dismissed as “regressive” (Minns 2001; Blackburn 2002). Yet when their institutional architecture is shaped in accordance with desert, DB pensions should be regarded as a means of horizontal income redistribution, giving workers the opportunity to save for their own retirement.
- 9.
- 10.
This would of course empower workers, financially, to affiliate to a second pillar pension.
- 11.
- 12.
In a DB pension scheme, contributions are invested on behalf of its members as a group, not individually, which means that realised rates of return are applied uniformly.
- 13.
Since the “discrepancy between interest and sacrifice is likely to be greatest for high-income, wealthy savers, we can assume as a general matter people are entitled to a greater proportion of the interest income they receive, the less income and wealth they have” (White 2004, p. 123).
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Hyde, M., Shand, R. (2017). Desert and Just Pension Design. In: Retirement, Pensions and Justice. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-137-60066-0_3
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