China's pension system Dorfman, Mark C; Holzmann, Robert; O’Keefe, Philip ...
2012., 2013, 02-26-2013, 2013-02-27, 2012-12-15, 20120101
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China is at a critical juncture in its economic transition. A comprehensive reform of its pension and social security systems is an essential element of a strategy aimed toward achieving a harmonious ...society and sustainable development. Among policy makers, a widely held view is that the approach to pension provision and reform efforts piloted over the last 10-15 years is insufficient to enable China's economy and population to realize its development objectives in the years ahead. This volume suggests a national pension system that no longer distinguishes along urban and rural locational or hukou lines yet takes account of the diverse nature of employment relations and capacity of individuals to make contributions. This volume is organized as follows: the main text outlines this vision, focusing on summarizing the key features of a proposed long-term pension system. It first examines key trends motivating the need for reform then outlines the proposed three-pillar design and the rationale behind the design choices. It then moves on to examine financing options. The text continues by discussing institutional reform issues, and the final section concludes. The six appendixes provide additional analytical detail supporting the findings in the main text. The pension system design can play an important role in supporting or constraining such economic and demographic transitions: 1) fragmentation and lack of portability of rights hinder labor market efficiency and contribute to coverage gaps; 2) multiple schemes for salaried workers, civil servants, and, in some areas, migrants similarly impact labor markets; 3) legacy costs that are largely financed through current pension contributions weaken incentives for compliance and accurate wage reporting; 4) very limited risk pooling and interurban resource transfers limit the insurance function of the urban pension system and create spatial disparities in old-age income protection; 5) low retirement ages affect incentives and benefits and undermine fiscal sustainability; and 6) relatively low returns on individual accounts result in replacement rates significantly less than anticipated while at the macro level, are likely to inhibit wider efforts to stimulate higher domestic consumption.
The past decade has brought an increasing recognition to the importance of pension systems to the economic stability of nations and the security of their aging populations. During this time, the ...World Bank has taken a leading role in addressing this challenge through its support for pension reforms around the world. Old-Age Income Support in the 21st Century attempts to explain current policy thinking and update the World Bank’s perspective on pension reform. The Bank has been involved in pension reforms in nearly 60 countries, and the demand for its support continues to grow. This book incorporates lessons learned from recent Bank experiences and research that have significantly increased knowledge and insight regarding how best to proceed in the future. The book has a comprehensive introduction and two main parts. Part I presents the conceptual underpinnings for the Bank’s thinking on pension systems and reforms, including structure of Bank lending in this area. Part II highlights key design and implementation issues where it signals areas of confidence and areas for further research and experience, and includes a section on regional reform experiences, including Latin American and Europe and Central Asia. This book will be of interest to Bank clients, the international community, and anyone interested in pension systems and reform.
Closing the Coverage Gap Holzmann, Robert; Robalino, David A; Takayama, Noriyuki
2009, 06-16-2009, 20090101
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Closing the Coverage Gap discusses how social pensions and other retirement income transfers can be used to close the coverage gap of mandatory pension systems. The book is organized in three parts. ...The first part makes the case for these programs by assessing the extent of the coverage gap around the world and evaluating the vulnerability to poverty of the elderly. The second part reviews the experiences of low, middle and high income countries with the design and implementation of retirement income transfers. The last part focuses on design issues. It analyses the incentive effect of these programs on labor supply and savings, fiscal costs, the role of targeting mechanisms, and alternatives in terms of institutional design and administration. The book also discusses the role of promising instruments such as matching contributions to reach parts of the informal sector.
All of the former transition economies
in Central, Eastern, and Southern Europe (CESE) inherited
from the era of central planning traditional defined-benefit
pension systems financed on a ...pay-as-you-go basis. Like many
pay-as-you-go public pension systems elsewhere in the world,
CESE pension systems were in need of reforms to address
short-term fiscal imbalances and longer-term issues relating
to population aging. Reforms were also needed to adjust
benefit and contribution structures to meet the challenges
of-as well as to take advantage of opportunities relating to
the transition to a market economy, including the widespread
adoption of multiplier designs with improved risk-sharing
across funded and unfunded pillars. By 2006, most countries
in Europe and Central Asia had introduced a voluntary
private pension scheme. By 2008, 14 countries roughly half
of all countries in the region had legislated mandatory
private pension schemes, and all but one of those schemes
(the one in Ukraine) had been introduced. These reforms
shared a number of common objectives, in particular putting
the systems on a sounder financial footing and better
aligning them with the (very different) incentives of a
market economy. This report is organized as follows. The
first section discusses the motivation for reform across the
eight countries included in the study against the backdrop
of the regional (and global) trend toward multiplier pension
arrangements. The second section summarizes the key
provisions of the reformed systems in the eight countries
within the World Bank's five-pillar framework for
pension system design. The third section summarizes pension
system performance against the two crucially important
dimensions of adequacy and sustainability. The last section
provides some policy recommendations for addressing gaps in
reforms and taking advantage of further opportunities.
The Chinese pension system is highly fragmented and decentralized, with governance standards, pension fund management practices, their regulation and supervision varying considerably both across the ...funded components of the Chinese pension system and across provinces. This paper describes the key components of the system, highlights the progress made to date and identifies remaining weaknesses, in regard to information disclosure, the governance framework and pension fund management standards.
Pension Reforms in Japan Kashiwase, Kenichiro; Nozaki, Masahiro; Tokuoka, Kiichi
12/2012
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This paper analyzes various reform options for Japan's public pension in light of large fiscal consolidation needs of the country. The most attractive option is to increase the pension eligibility ...age in line with high and rising life expectancy. This would have a positive effect on long-run economic growth and would be relatively fair in sharing the burden of fiscal adjustment between younger and older generations. Other attractive options include better targeting by "clawing back" a small portion of pension benefits from wealthy retirees, reducing preferential tax treatment of pension benefit incomes, and collecting contributions from dependent spouses of employees, who are currently eligible for pension benefits even though they make no contributions. These options, if implemented concurrently, could reduce the government annual subsidy and the government deficit by up to 1¼ percent of GDP by 2020.
In the 1990s many emerging economies in Central Europe and Latin America initiated their pension reforms. While most analysis to date has focused on the accumulation phase, there are a number of ...lessons to be shared as countries start to prepare the retirement options for their contributors, with this book addressing these issues from a public policy perspective.
Global financial stability report, April 2012 International Monetary Fund. Monetary and Capital Markets Department; International Monetary Fund. Monetary and Capital Markets Department
2012., 04/17/2012, 2012, 2012-04-15
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The April 2012 Global Financial Stability Report assesses changes in risks to financial stability over the past six months, focusing on sovereign vulnerabilities, risks stemming from private sector ...deleveraging, and assessing the continued resilience of emerging markets. The report probes the implications of recent reforms in the financial system for market perception of safe assets, and investigates the growing public and private costs of increased longevity risk from aging populations.
This study finds that pension reforms in recent years have improved the efficiency and sustainability of pension systems in the new member states of the European Union and Croatia. However, for many ...countries, these probably have not gone far enough to ensure long-term sustainability, given the aging of the population. Reforms have included changes to Pay-As-You-Go (PAYG) systems, including increases in retirement ages (not at least for women), new benefit formulas, and new indexation mechanism. Some countries (Latvia and Poland) have further strengthened the link of contributions and benefits to the sustainability of the PAYG system through the introduction of national defined contribution accounts. The link is strengthened also by moving to a point system, which has been adopted by many of the countries. Several countries have introduced a second, private, pension pillar, funded through diversion of part of the pension contributions, thereby diversifying risk. However, some countries (in particular the Czech Republic, Slovenia, and Romania) will need to do more to safeguard the long-term viability of their pension systems, while others face challenges to ensure equitable pension systems and adequate living standards for all elderly people.
