Reforming Pensions in Developing and Transition Countries

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

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

Šiame straipsnyje analizuojama prieš penkerius metus pradėta Lietuvos socialinio draudimo senatvės pensijų struktūrinė reforma, kurios metu dalis socialinio draudimo įmokų pervedama į gyventojų pasirinktus privačius pensijų fondus. Šio straipsnio tikslas - apžvelgti reformos pradžioje jai keltus tikslus, įvertinti jų pagrįstumą socialinės apsaugos ekonomikos teorijos požiūriu, išanalizuoti pradinius pensijų reformos rezultatus. Siekiant šio tikslo išanalizuotas pensijų reformų regione pobūdis, socialinio draudimo pensijų dalinio privatizavimo Lietuvoje ypatybės, kelti privatizavimo tikslai ir besiformuojanti privačių pensijų rinką Lietuvoje. Straipsnyje remiamasi pasaulyje gerai žinomų pensijų ekonomikos tyrėjų publikacijomis, pensijų reformą reglamentuojančiais Lietuvos Respublikos įstatymais, Lietuvos valstybės institucijų skelbiama ekonomine ir socialine statistika.Autoriaus atlikta analizė rodo, kad privačių pensijų fondų klientų asmeninėse kaupiamosiose pensijų sąskaitose kaupiamo turto investicijų grąža nepadengia nuostolių, kuriuos jie patirs dėl dalinio pasitraukimo iš socialinio draudimo pensijų sistemos. Straipsnyje taip pat parodyta minėtos pensijų reformos našta, kuri tenka dabartiniams pensininkams. Pagrindinė straipsnio išvada - reformos tikslai buvo per daug ideologizuoti, o pirminiai rezultatai nepalankūs nei dabartiniams, nei būsimiems pensininkams. Lietuvoje 2004 metais įvykdytos pensijų reformos analizė akademinėje literatūroje pateikiama pirmą kartą.

Introduction: evaluation of pension reform the structure of the book. Part 1 Background to pension reform in Latin America: the origins and evolution of pension schemes explaining pension scheme deficits why structural pension reform? conclusion. Part 2 The reformed pension schemes: the main functions of pension schemes evaluating pension scheme design the individual capitalization pension scheme in Chile comparison of pension reform in Latin America conclusion. Part 3 The pension fund management market: main features of the private pension market in Chile the performance of pension schemes managers competition and regulation in the pension fund management market issues of efficiency and redistribution the new pension fund management market in Latin America the evolution of the pension fund management market in Chile, Peru and Argentina conclusion. Part 4 Pension reform, saving and capital market: pension reform and saving: pension reform and capital markets pension reform and financial markets in Latin America conclusion. Part 5 Pension scheme cover: pension reform and labour market efficiency pension scheme coverage - definitions and policy issues pension scheme coverage in Chile pension scheme coverage in Latin America conclusion. Part 6 Retirement income: the elderly, retirement income and poverty pension benefits in the new pension schemes and retirement income conclusion. Conclusion: an assessment of pension reform in Latin America lessons from other countries future trends and research agenda.

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 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.

For both economic and regulatory reasons, most developing countries have underdeveloped pension funds and insurance sectors, and their social security systems face many financial and organizational problems. Wide-ranging reform would produce considerable economic and social benefits. A restructured social security system would avoid financial involvency and be better able to meet its objectives of redistribution. The development of pension funds and insurance business would generate long-term financial resources that could stimulate the growth of capital markets and might help provide adequate, affordable long-term benefits to members and policyholders. The main objectives of an ambitious reform program should be to: a) prevent the insolvency of the social security system (a longer run problem for developing countries with young populations) and thus ensure adequate but affordable, sustainable pension generate long-term financial resources that could stimulate the growth of capital markets and might help provide adequate, affordable long-term benefits to members and policyholders. The main objectives of an ambitious reform program should be to: a) prevent the insolvency of the social security system (a longer run problem for developing countries with young populations) and thus ensure adequate but affordable, sustainable pension benefits; b) remove incentives that encourage the strategic manipulation, and hamper the efficient functioning, of labor markets; c) control the occurrence of perverse, capricious redistribution by removing the many design faults that afflict security systems in most developing countries; and d) generate long-term financial savings that can help stimulate the modernization and growth of capital markets, finance long-term investments, and facilitate privatization. Although there is no single optimal way to sequence and pace a reform program, the full benefits of reform will not be realized until social pension systems are restructured and downsized, contribution rates lowered, and the scope for private pension funds (whether voluntary or mandatory) increased. One often-ignored imperative is to defer indexing the pension system until its many design flaws are corrected. Finally, reform of the insurance sector is essential for the whole program to succeed, because of the close links between pension reform and the provision of life, disability, and annuity insurance services.

The paper is focused on the analysis of the foreign experience in the field of creation and reformingof the pension systems. The paper is aimed at studying the economic bases of the forming of defined contributionpension systems in foreign countries and revealing of the main tendencies in pension reforms in foreign countries todefine the possibilities of the pension reform for Kazakhstan. To achieve the set goal the paper investigates the maintypes of the pension system and its existing levels. The analysis of the stated elements of the pension system wasbased on the example of the countries of the Organization of Economic Cooperation and Development. Theconducted investigation allowed revealing the advantages and disadvantages of the pay-as-you-go, definedcontribution, and mixed pension schemes. Basing on the conclusion on the necessity to use the foreign experience inimplementing the Kazakhstan pension reform, the concrete trends of its further reforming aimed at improving theeffectiveness of the Kazakhstan pension system and its approach to the worldwide standards were proposed.The investigation results can be used for developing the program documents defining the strategy of the pensionschemes development under the contemporary economic and demographic conditions. The conclusions andrecommendations on the pension scheme improving proposed in the work can be used for the pension reform inKazakhstan.

The paper describes Chile’s pension reform of 1980, which replaced the existing pay-as-you-go public pension programs by a new funded pension program managed by private companies (the AFP´s). It comments on the main results of this reform so far, and identifies the current challenges faced by the country’s pension system. The paper also describes the changes introduced to Chile’s pension system in March 2008 and assesses their potential impact. The Chilean case shows that parametric reforms preceding the creation of a funded program can reduce political resistance to structural pension reform. Chile’s experience also suggests that the consistency of opinions among the economic, social security and labor market authorities responsible of designing and conducting a pension reform process can help to sell the reform to the political authorities. If the decision is to replace an existing pension program by a new one, it also seems necessary to have specific rules that, in some particular circumstances and for a limited period of time, allow discontented workers to go back to their former pension program. Chile’s experience also shows that the quality of pension programs micro design is relevant since individual decisions and portfolio managers investments decisions are shaped by regulations. Results so far suggests that the reform has been successful in improving the long term sustainability of Chile’s pension system; in creating a more fair system; in promoting the development of capital markets; and in removing some distortions to the operation of labor markets. On the other side, there is some room for the new program operational costs and prices to go down, and expectations about an increase in second pillar coverage have not been met. While some regulatory changes could improve the extent and quality of the funded pension program coverage, the long-term solution to the economic problems of retirement involves the labor market. To improve future pensions more jobs in the formal sector of the economy should be created; unemployment must be reduced; and working lives should be extended.

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 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.

1. Introduction: Why Does Asia Need Well-Functioning Pension Systems?, Donghyun Park and Gemma Estrada 2. People's Republic of China: Pension System Overview and Reform Directions, Stuart H. Leckie 3. Indonesia: Pension System Overview and Reform Directions, Yves Guerard 4. Republic of Korea: Pension System Overview and Reform Direction, Seong Sook Kim 5. Malaysia: Pension System Overview and Reform Directions, Mukul G. Asher 6. Philippines: Pension System Overview and Reform Directions, Ernesto Reyes 7. Singapore: Pension System Overview and Reform Directions, Mukul G. Asher and Amarendu Nandy 8. Thailand: Pension System Overview and Reform Directions, Orin D. Brustad 9. Viet Nam: Pension System Overview and Reform Directions, Giang Thanh Long 10. Policy Options for Reforming Developing Asia's Pension Systems, Donghyun Park

This article discusses some theoretical conceptual aspects of the problem of Public Administration in Singapore. At different stages of its economic development, the Singapore government has faced various housing problems. In the 1960s, a comprehensive system of land and housing provision and financing was created to solve the problem of housing shortages. This article analyzes the main pillars of the reform of the pension and housing systems, in particular, identifies such issues as the rules for resolving pensions, providing the population with social housing, the importance and necessity of the Central Provident Fund Board in Singapore, the policy of ethnic integration and the rental scheme. In this article, the main policy changes presented were evaluated and recommendations for reforming the housing market were given. The long-term evolution of Singapore’s economy has been analyzed in comparison with the past, and we have tried, in addition to analyzing the current situation, to give forecasts and political recommendations for the future. In addition, in this article, we studied the practical value and significance of Singapore’s experience for Kazakhstan, comparing the main similarities and differences in pension and housing policy reform in Singapore and Kazakhstan. Key words: Singapore, Government, Public Administration, reform of pension and housing systems, social housing.

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 increased privatization of pensions – the shift from state to private responsibility for old age retirement income – raises fundamental issues of participatory stakeholder rights and social inequality. International organizations and national policymakers advocate for a policy shift away from pay-as-you-go (PAYG) financed public pension schemes towards private, mainly prefunded, pensions. This is largely motivated by an economic logic of financial sustainability in ageing societies under fiscal austerity and of boosting financial capital markets to create economic growth. Pension reforms over the last two decades cut back public pension benefits, gradually extended the official retirement age, and fostered privately funded pensions. While the sustainability endeavour was driving much of these pension reforms, the adequacy of retirement income has often been neglected from current public debates, partly because poverty in old age seems no longer to be such a pressing concern in Europe’s advanced welfare states. Yet poverty and income inequality vary across pension systems in Europe; they are also on the rise due to the continued retreat of public pensions and the larger reliance on voluntary prefunded private pensions. The recent financial market crises during the 2000s reveal the problematic nature of funded pensions that fall short of expected returns. These developments pose major questions with respect to the increasing role of private pensions: Does the retreat from public responsibility lead to more private initiative that fills the gap in future old age income provision? How are these private pensions that are invested for the benefit of future pensioners governed and regulated? To what extent are the risks of old age income security shifted onto individuals, and will income inequality grow larger? Although some countries have a long tradition in pension fund capitalism, others have only recently decided to change from dominantly public to multipillar pension schemes. ‘Private’ pensions are not the same everywhere across