Pension Reform in Chile Revisited

1. Introduction and Overview Katja Hujo PART I: POLITICAL ECONOMY ISSUES IN PENSION REFORM 2. Pension Privatization and Economic Development in Central-Eastern European Pension Reform Katharina Muller 3. Pension Schemes and Pension Reforms in the Middle East and North Africa Markus Loewe 4. The Reform of the Civil Service Pension Programme in Korea: Changes and Continuity Huck-ju Kwon PART II: PENSION SYSTEM AND REFORM IN THE BRICS 5. Recent History, Perspectives and Challenges to Pension Policy: The Brazilian Case Marcelo Abi-Ramia Caetano 6. Social Security Reform and Economic Development: The Case of India Mukul G. Asher and Azad Singh Bali 7. Towards Universal Coverage: A Macro Analysis of China's Public Pension Reform Lianquan Fang 8. The Private Affairs of Public Sector Pensions in South Africa: Debt, Development and Corporatization Fred Hendricks PART III: BRINGING THE STATE BACK IN 9. Pension Reform in Bolivia: Two Models of Income Security in Old Age Peter Lloyd-Sherlock and Kepa Artaraz 10. Pension Reform in Chile and Argentina: Towards More Inclusive Protection Katja Hujo and Mariana Rulli 11. Conclusions Katja Hujo

Natia Kakhniashvili E-mail: Natia.kakhniashvili@tsu.ge Doctor of Business Administration Iv. Javakhishvili Tbilisi State University Tbilisi, Georgia https://orcid.org/0009-0004-0759-198X Khatuna Barbakadze E-mail: Khatuna.barbakadze@tsu.ge Candidate of Economic Sciences Iv. Javakhishvili Tbilisi State University Tbilisi, Georgia https://orcid.org/0009-0001-1670-8463 Nato Kakashvili E-mail: Nato.kakashvili@tsu.ge Candidate of Economic Sciences Iv. Javakhishvili Tbilisi State University Tbilisi, Georgia https://orcid.org/0009-0005-1399-1784 Abstract. Pension policy is a critical component of a state's social policy. Current global trends, particularly those associated with population aging, have heightened the need for effective pension system reforms. The stability and efficiency of pension systems are vital elements of a society's social welfare infrastructure, ensuring financial support for retirees and promoting their well-being in old age. However, pension systems face significant challenges due to demographic shifts, economic fluctuations, and evolving societal expectations. Traditional pension systems often struggle to fully meet the needs of retirees, and many existing schemes experience substantial volatility, jeopardizing their long-term sustainability. As a result, the need for pension system reform has become increasingly urgent. To address these challenges, states must implement more comprehensive reforms aimed at effectively modernizing their pension systems. Pension reform refers to the process by which a government or employer makes substantial changes to the structure, policies, and regulations governing pension benefits. Successful reforms typically require thorough analysis, consultation with stakeholders, and legislative action to ensure effective implementation. The pension system of Georgia has undergone several important stages of reform in recent decades. After gaining independence, the country implemented socio-economic transformations, which were accompanied by demographic aging and shifts in labor market dynamics. These changes underscored the need for reforms in the pension system. The pension system faces several significant challenges. Foremost among these is the demographic trend of an aging population coupled with a declining birth rate, which poses a serious threat to the long-term sustainability of the system. Additionally, the expanding informal labor market and high unemployment levels further complicate the situation, creating obstacles that could undermine the stability of pension benefits for future retirees. Addressing these fiscal challenges requires the implementation of innovative policies that ensure adequate retirement income for citizens while maintaining the system's viability. The reform of the pension system requires the joint participation of the government and society. The government should strengthen supervision and management, create an effective management and supervision mechanism of the pension system. Pension system reform is complex. Different countries have different levels of economic development, demographic structure, social security system, etc. Key words: pension system, reform, efficiency, risks, modernization. JEL classification: H 55, J1

Chile pioneered in Latin America not only the introduction of social security pensions, but the structural reform that privatized them and a process of “re‐reform” implementing key improvements. A Presidential Commission in Chile, appointed in 2014 to evaluate reform progress and remaining problems in the pension system, released its report in September 2015. In light of the Commission's findings, the article assesses Chile's compliance with International Labour Organization social security guiding principles: social dialogue, universal coverage, equal treatment, social solidarity, gender equity, adequacy of benefits, efficiency and affordable administrative cost, social participation in management, state role and supervision, and financial sustainability. The exercise follows three stages: the structural reform (1981–2008), the re‐reform (2008–2015), and the Presidential Commission proposals (2015)

The authors review the qualitative macroeconomic and welfare implications of replacing a pay-as-you-go pension system with a fully funded scheme. They summarize the typically small effects found in the simulations literature, based on exogenous-growth one-sector models. Much larger, and sustained, effects are obtained in the framework of an overlapping-generations model with endogenous growth and formal-informal production sectors - the model presented in this paper. Model simulations using the overlapping-generations model suggest that replacing a pay-as-you-go system with a fully funded system could substantially raise long-term growth rates by eliminating the incentives (under the pay-as-you-go system) to informalize production and employment. A final look at Chile's reform experience suggest that a structural transformation toward formalization is taking place and that both private savings and growth have been rising substantially since 1980. Econometric evidence suggests that Chile's pension reform, in 1981, could be contributing toward Chile's large increase in private savings.

Los países de la OCDE comparten una creciente preocupación tanto por la idoneidad de sus sistemas de pensiones como por su capacidad para proporcionar pensiones decentes a los beneficiarios tras su jubilación. La participación de los futuros beneficiarios en la gestión de los fondos, así como en el proceso de reforma, puede servir para mitigar esas preocupaciones, al tiempo que da legitimidad a los sistemas en cuestión. En el presente estudio se analizan las formas de participación en los sistemas de pensiones y las reformas en Chile, España e Israel. Encontramos que existe la participación en diferentes formas y contextos en los tres países. No obstante, en los tres países es necesario aumentar la participación de los futuros beneficiarios en la gestión de los fondos, así como en las reformas de las pensiones.

The aim of this article is to define the Japanese, South Korean and Lithuanian latest pension system reforms and measures during economic crisis. Problems of the Japanese, S. Korean and Lithuanian pension systems are similar to the others industrial Asian or European Union countries: ageing, impact of economic crisis and pension system budget deficit. Moreover, the Japanese, S. Korean and Lithuanian population ageing rapidly (low birth rate, longer life expectancy) and it influences the entire society and requires more complex and pressing pension systems reforms. All countries of the world fighting against the ageing and searching for the pension system financial sustainability. After the universal pension system reform in 1985, the task of Japanese government is to ensure for each participant an adequate and regular pension income, to implement the social justice and solidarity. Pension system reforms in S. Korea began intensively only since 1997 and this was associated with a global currency crisis. Since the end of the last century until 2009, S. Korean government has developed a modern social security and social assistance systems. The government is constantly increasing social security coverage and benefits (from 1999 to 2009, social benefits increased almost four times). However, the social security coverage is still insufficient, income disparities increasing and the financial disbalances require to reform the pension system for a long-term perspective. The pension system reform of 2003 and 2011 raised the wide discussion on the state social pension insurance system future development of Lithuania. This reform clearly demonstrates that the government in 2003 opted for a liberal position and in 2011 – it was decided to strengthen state social insurance guarantees. KEY WORDS: pension system, reform, crisis, ageing, Japan, S. Korea, Lithuania.

The contemporary global debate about pension reforms is based mainly on the concern for the long-term financial viability of existing government operated pension systems. Against this background, Nigeria, Sweden and Chile responded to the challenges posed by their pension systems by initiating reforms. While Chile and Nigeria completely moved from a defined benefit system to a defined contribution system, Sweden chose a “hybrid”, a model which has received wide acclaim by social security experts. Given the interest pension systems and reforms have generated globally as well as in Nigeria, a cross-country comparative analysis is imperative to bring into sharp focus the specific differences and similarities in these three pension reforms if any. Thus, this study comparatively evaluates the Nigerian, Swedish and Chilean pension reforms as a means of enriching ongoing global debate and crosscountry comparisons on pension reform experiences. Guided by a three dimensional classification framework which describes the options available in reforming a pension system, three core benchmarks were used for this comparative analysis. These are the objective(s) of reform, the model of reform adopted, and the likely outcomes of reform vis-a-vis meeting the redistribution, saving and insurance functions of a pension scheme. Results indicate that the Chilean and Nigerian models are less likely to achieve the redistribution and insurance functions of a pension scheme while the Swedish model is better placed to achieve all the three key functions of a pension system. It is recommended that opportunities for achieving the redistribution and social insurance functions of a pension scheme should be explored in subsequent amendments to the pension legislation. Keywords : Demographic crisis, Pension reform, Public policy

In all states of European Union reforms in pension system are being made, likewise in Latvia. Demographic and economic problemsthat are occurred forces pension reforms to be made. New developed pension reform includes different processes, like – formation offinancial equilibrium between incomes and costs, limit performance in going early in pension, increasing of age of going in pension,rebalancing between men and women. Simultaneous formation of state and private pension systems could prevent some of the majordrawback in system of pension that undermines the pension system of nowadays. Unfortunately the high social security contributionsof state sector persons lacks of money, for deposit in private pension funds. Using method of logic synthesis, as the target authorsnominated to examine problems of pension systems in the Baltic States, as well as similarities and divergences in problems andperspectives, with the status of private pension funds in accumulating pension system.KEY WORDS: labour market, pension system, pension funds, the Baltic States.

Recasting Pensions in Europe: Policy Challenges and Political Strategies to Pass Reforms

The aim of the scientific article is to study the peculiarities of the operation of funded pension systems in Eastern Europe, determine their advantages, disadvantages, the impact of various factors on their efficiency, assess the role of funded pension insurance in them and to justify their positive experience in pension reform оf Ukraine. Research methods. When writing a scientific article, appropriate research methods were used: balance, monograph methods, the method of statistical grouping and tables, methods of analysis using generalizing indicators: absolute and relative, averages and time series data. Research methodology. The assessment of the level of social standards of pension systems in Eastern Europe and Ukraine was carried out by comparing the level of pensions, wages, replacement rate. The demographic situation was characterized by the use of forecast calculations of international financial organizations. The information and methodological base of the research was the materials of international financial organizations, which characterize the development of funded pension systems in Eastern Europe, forecast calculations in the demographic sphere, special economic literature, scientific works of domestic and foreign scientists on the study of funded pension insurance. Results. The scientific article considers the issues of reforming the national pension systems of Eastern Europe in modern conditions, the peculiarities of their development taking into account the manifestation of demographic factors, focuses on the functioning of multilevel pension models, defines the role of funded pension programmes in pension income. It is noted that modern approaches to the formation of national pension systems are based on the use of pension insurance principles. An assessment of the level of social standards in Eastern Europe is made and a comparative analysis of them with the relevant indicators in Ukraine is given, the features of the use of funded pension programmes at the present stage of reforming the pension systems of Eastern Europe are identified. The necessity and preconditions of introduction of obligatory accumulative pension insurance in Ukraine at the present stage of reforming its national pension system are substantiated, it is noted that practical use of accumulative pension programmes will gradually lead to increase of social protection level of people of retirement age, increasing investment in the national economy.

This article aims to study the Kosovo economic transition process and its impact on the Pension system reform. The study will focus on; model of new economic building system (market liberalization, economic recovery, the concept of entrepreneurship development, system integration of economic trends in the global economy, privatization and transformation of property, social welfare, social justice), etc. During this study different theories on the transition process in the economy will be used, as well as theories on reforming the pension system in the world, which affirm the sustainability of the construction of the new economic and pension system. Methods used will serve to draw relevant conclusions as follow; heuristic, descriptive, historical, comparative, statistical. The hypothesis of this study is, "Impact of the economic reform system in Kosovo and its results in the construction of the new sustainable pension system model." Through this study conceptual changes to the economic system will be put forward, dealing with socialist and liberal philosophy, as different concepts of economic development, the role of the state or the market as a regulator of the economic system. In particular, attention is paid to the new pension system in Kosovo; the causes for reform of the pension system, reforming the pension system, the basic goals of the reform of the pension system, the types of pensions systems in the world, the conceptual basis of the construction of the pension system in Kosovo, the principles of the reform of the pension system, the regulatory framework of the new pension system in Kosovo, advantages and challenges of multi pillar pension system model, the model used for Kosovo's pension system, pension schemes in Kosovo, the efficiency of the new pension system in Kosovo, comparing the new pension system in Kosovo with pension systems of other countries in the region.

This dissertation compares the political economy of pension systems and reforms in four Central, Eastern and Southeastern European countries, Croatia, Hungary, Poland and Slovenia. The study employs a historical institutionalist framework to analyse the policies, actors and institutions that characterised the period between the collapse of socialism and 2008. Similar to other transition economies, Central, Eastern and Southeastern European countries inherited inequitable public pension systems that already under socialism experienced severe financial strains. These pressures became unsustainable during the transition to a market economy. Already ill-prepared to withstand the longterm effects of demographic ageing, in the context of acute labour market crises, these schemes were overstretched to the point of breakdown. As a result, the region’s retirement schemes underwent three reform phases. Before the mid-1990s, local policymakers tried to solve the crisis via parametric adjustments. When that failed, a debate on systemic change launched the second, structural reform phase, which culminated in the adoption of paradigmatic reforms in a number of countries in the late 1990s. Although the outcomes vary, Central, Eastern and Southeastern European countries eagerly embraced the new pension orthodoxy of the time, which prescribed a shift to partial funding and a stricter link between contributions and benefits. There then followed a third implementation phase, which saw a fine-tuning of these schemes and the emergence of unforeseen and sometimes critical problems. The unprecedented scope and depth of this transformation has elicited a vast academic literature. Existing research mainly focuses on the first two phases in the attempt to explain how reforms were possible and what interests and motives pushed them forward. What remains largely unexplored is the fate of the new reformed systems and the sources of their current problems. This dissertation fills the gap by encompassing all three reform periods. After providing an overview of the early reform phases and exploring the surprising feasibility in certain countries of paradigmatic reform, this study focuses on the third period to show that reform outcomes may not only be fiscally or socially unsustainable, but also that under certain conditions they become vulnerable to shifts in political power. This study’s principal argument is that successful pension reform implies the rewriting of the underlying social contract. This means that reformers should adopt inclusive rather to unilateral modes of policymaking, and take into consideration the interests and expectations of the broader polity in formulating their policy proposals. Failing that, reforms may not be accompanied by sufficient incentives to ensure ongoing political support at all levels. This line of thinking contrasts with claims in the literature that favour the unconstrained executive model, which is deemed more effective in terms of reform capacity, or others which emphasize the significant tradeoffs between a reform’s responsiveness to socioeconomic challenges and its political sustainability over time. Jury: Nicholas Barr (LSE), Martin Kohli (EUI) – Igor Guardiancich – Tine Stanovnik (Uni. Ljubljana), Martin Rhodes (Univ. Denver/formerly EUI) Igor Guardiancich graduated in Economics at the Universita di Trieste in 2001 and obtained his Master’s degree in Political Economy of Transition at the London School of Economics in 2003. The following year he joined the European University Institute. His working and research experience includes periods spent at the European Commission (DG Enlargement), at the International Labour Organisation, at the European Trade Union Institute. As for his academic involvement, in 2007 he was a visiting fellow at the Central European University in Budapest and at the Centrum Europejskie Natolin in Warsaw. He collaborates with various research networks, such as RECWOWE, Reconciling Work and Welfare in Europe, on the interplay between flexicurity and old-age pensions and the ERSTE Foundation Social Research Fellowship ‘Generations in Dialogue’, on social inclusion and pensions in former Yugoslavia. He is currently employed in a project on pension reforms for the Belgian government through the Observatoire social europeen in Brussels and started working as academic collaborator on higher education issues at the Academic Careers Observatory of the Max Weber Program in Florence.

Purpose: The article discusses financial aspects of the functioning of pension systems in selected countries of the European Union. Changing demographic conditions (aging populations) pose a serious challenge to the financial stability of pension systems in Europe. This article discusses the differences between the pension systems of two selected European countries - Poland and Germany - in terms of pension expenditure, the efficiency of these systems and changes in financing between 2021 and 2024. The aim of this article is to analyze the issue of financing in two representative countries: Poland and Germany, to identify differences in the pension systems in these countries, and to highlight the main challenges they face. The hypothesis is that the pension system in the European countries studied is not a sustainable pension system, assuming that the amount of pension contributions collected is sufficient to pay current pension benefits. Design/methodology/approach: The objective of the article was achieved by verifying secondary sources and conducting a comparative analysis in formal and financial terms. The article draws on literature on social security and social insurance, both in the field of economics and law. The legal sources, materials, and statistical sources were used to present the issues. In addition, materials available on the Internet, including those published by Eurostat, MISSOC, and the OECD, were used in the study. Findings: The data presented in the article concerning two representative countries of the European Union and the financial efficiency indicators of the Polish and German pension systems presented in the article confirm the hypothesis put forward in the article. Contemporary pension systems in highly developed countries are struggling with many problems, mainly resulting from demographic processes. Aging societies and declining birth rates are contributing to changes in the population structure. As a result, there is an increasing need to reform pension systems to adapt them to the current demographic situation. Every pension system reform is a long-term and multifaceted process, and there is no single universal solution that would fully resolve all problems. It is important to take into account the unique demographic, social, and economic conditions of a given country and to rely on broad social consensus. Despite the differences in institutional solutions in individual countries, both the reforms that have been implemented and those merely proposed by the European Union show a common direction of change. This consists of striving to ensure the financial stability of pension systems. More profound changes in the pension systems of European Union member states are inevitable - the pension systems need to be strengthened through broader fiscal reforms, social activation, and increased trust in the system. Research limitations/implications: The topic discussed in the article is very important in the contemporary context due to the financial deficit of social insurance. During the research, certain limitations were observed in access to information, both domestic and international, which could facilitate a more in-depth analysis of the presented issue. Practical implications: The practical consequence of balancing the pension system in Poland - as well as in other EU countries - would be the elimination of the enormous subsidies from the state budget to institutions paying out benefits. Social implications: A country that would not have to subsidize the institutions paying pension benefits could allocate those funds to other important social goals, such as education, public infrastructure, the healthcare system, and so on. Originality/value: By analyzing financing issues in two representative countries, Poland and Germany, identifying differences in their pension systems, and highlighting the main challenges they face, it is possible to better understand the different approaches to pension provision in Europe and their economic effects. Keywords: pension systems, old-age system, financial efficiency of the system, European Union. Category of the paper: Research paper.

The reform of the national pension system in Ukraine has been significantly complicated by the hostilities that are taking place on the territory of our country. They significantly influenced the financial condition of the pension sector, as well as the further development of pension relations between the State and citizens. The aim of the scientific article is to study the state of the pension sphere of Ukraine in the conditions of hostilities on its territory, to analyze the features of the development of pension relations between the main subjects of the domestic pension system and to determine the main ways to improve the pension provision of the population. The article characterizes the pension system of Ukraine before the imposition of martial law, indicates the formation of a three-tier pension model on the model of most European countries. Attention is focused on the challenges and problems that took place in the pension sector until 2022, the peculiarities of the formation of pension relations under martial law are studied, the impact of the ongoing hostilities in Ukraine on the financial condition of the domestic pension system is analyzed. The results of the study showed that the crisis phenomena in the national economy, large-scale migration of citizens abroad, and the unfavorable demographic situation significantly complicated the financing of social and pension programs. An assessment of the sources of financing pension payments indicates that own financial resources have become insufficient, so there is a need to attract funds from international financial organizations. The peculiarities in the formation of pension relations between the State and citizens related to the retirement age and the length of service to date are determined. It is emphasized that, despite the difficult situation in the country, the government is taking measures to further reform the domestic pension system. Among them, it is necessary to highlight the establishment of fair pensions for those pensioners to whom they were assigned relatively long ago, as well as the introduction of a mandatory accumulative component of the pension system.

The relevance of the paper is caused by the fact that the current pension system did not satisfy either citizens, since their pensions were extremely miserable, neither employers due to the high level of contributions to the Pension Fund of the Russian Federation, nor the government, since the low level of pensions caused social and, as a consequence, political tension, nor the subjects of the Russian Federation, since the unfunded pension system obliged the regions to deduct funds from their own funds to cover pension obligations to subsidized regions. The way out of this situation is the creation of a new pension reform, which will increase the size of the pension by increasing the income of the pension system itself. The main goal of the pension reform is to increase the welfare of Russian citizens after they retire. The subject of the study is a new pension reform, the stimulus of which was to become a transition from an unfunded to a defined contribution pension system. The aim of the study is to identify the main economic reasons for creating a new pension reform. Methodology. To study the new pension reform, the main indicators are systematized: the minimum length of service for assigning an insurance pension, the amount of pension points for the period from 2015 to 2024 and subsequent years, and pension calculation formulas. Results. According to the new pension reform, the employee is encouraged to show full salary for employers to pay insurance contributions. The conditions are created to remove real wages from the “shadow”. The unfunded pension system caused social instability, caused a conflict of generations, workers and employers, destabilized the authorities. The new pension reform is designed to provide conditions for mutual assistance of generations and social partnership. The unfunded pension system led to the fact that pension payments were a heavy burden on the economy. The new pension system, at the expense of the funded part of the insurance contribution, creates an investment resource of “long money” (with a demand period of 25-30 years). Thus, the pension system not only serves elderly citizens, but also really works to develop the domestic economy.