Public Pension Replacement Rates Essay Example | Topics and Well Written Essays - 500 words

Public Pension Replacement Rates - Essay Example In pension systems where workers get substantially different payouts due to their differing incomes,  replacement rate is a common measurement which can be used to determine the effectiveness of the pension system† (Investopedia, 2011, par. 1). In the United States, the pension replacement rate is revealed as 40% (Reno and Lavery, 2007, 1) compared to 70% - 80% in Greece (Nelson, Belkin and Mix, 2010, 4). There is a variance in replacement rates which is caused by interplay of factors such as wage rates and profiles, broken career, and length of active life, among others. Variance in Replacement Rates According to the Indicators Sub-Group (ISG) of the Social Protection Committee (SPC) (2006), â€Å"variants include different lifetime earning profiles (linear profile from 80% to 120% and from 100% to 200% and concave profile) as well as one low wage variant (flat 66% of the average), but also the variants also include a calculation for a broken career† (9). Other varian ts that cause disparities in pension replacement rates are age of retirement and career length, as well as the level of rate of return (ISG of SPC, 2006, 10).