Andrew Samwick said that pensions are designed on a group basis, but that workers and households vary dramatically in their motivations and needs for saving. For example, he said that in surveys many workers do not report retirement as a motive for saving, but instead report other targets, such as housing and education expenses. He said that heterogeneity in savings motives needs to be taken into account when thinking about Social Security reform and its impact on the private pension system. He stated that heterogeneity in savings motives implies that households differ in their willingness to accept lower wages in order to obtain pensions. He claimed that Social Security reform would have a significant impact on trends in the private pension system, mainly owing to the mechanism of the non-discrimination rules. As an example, he postulated that the normal retirement age in private pension plans would mimic changes in Social Security’s normal retirement age.
David Wise said that Andrew Samwick’s framework assumes that on average firm pension arrangements are now optimal given the current Social Security system. So if the Social Security system changes, the private system would no longer be optimal and firms would want to change their pension arrangements. However, he had a different perspective on which pension trends would dominate in the future. He said that looking ahead, we may be on our way to a universal system of individual accounts based on the 401(k) model. He claimed that this may drive whatever reforms we eventually make to the Social Security system.
