Switching : The Role of choice in the Transition to a Funded Pension System

The transition from a wholly public, pay-as-you go pension system to one where pensions are also provided by individual, privately managed pension accounts does not directly affect those receiving pensions at the time of the reform. Nevertheless, i...

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Main Author:	World Bank
Format:	Brief
Language:	English
Published:	Washington, DC 2012
Subjects:	ACCRUAL RATES ACCRUALS ACCUMULATION PERIOD ADMINISTRATIVE COSTS ADVERSE SELECTION BENEFIT FORMULA BENEFIT LEVEL BENEFIT RIGHTS CAPITAL MARKETS CONSTITUTION CONTRIBUTION RATE CONTRIBUTION RATES DEFICITS DISTORTIONARY TAXES EMPIRICAL ANALYSIS EMPIRICAL EVIDENCE EQUILIBRIUM FINANCIAL DIFFICULTIES FISCAL FISCAL BURDEN FISCAL COSTS FISCAL POLICY FISCAL PRESSURES FUNDED COMPONENT FUNDED PENSIONS GOVERNMENT REVENUES HUMAN DEVELOPMENT HUMAN DEVELOPMENT NETWORK INFLATION INFLATION RISK INSURANCE INVESTMENT RETURNS LABOR MARKETS LABOR SUPPLY LEGAL SYSTEM MARKET RISK NEW ENTRANTS PAY AS YOU GO PENSION COVERAGE PENSION FUND PENSION PLAN PENSION PLANS PENSION REFORM PENSION RIGHTS PENSION SYSTEM PENSION SYSTEM REFORM PENSIONS PERSONAL PENSIONS POLICY DECISIONS POLITICAL ECONOMY PRIVATE PENSION PRIVATE PENSION FUNDS PRIVATE PROPERTY PRIVATIZATION PRIVATIZATION PROCEEDS PUBLIC FINANCES PUBLIC INFORMATION PUBLIC SCHEMES REPLACEMENT RATE RETIREMENT RETIREMENT AGE RETIREMENT INCOME SOCIAL ASSISTANCE SOCIAL PROGRAMS SOCIAL PROTECTION SOCIAL SECURITY SOCIAL SECURITY REFORM TAXATION
Online Access:	http://documents.worldbank.org/curated/en/2005/07/6265567/switching-role-choice-transition-funded-pension-system http://hdl.handle.net/10986/11212

id	okr-10986-11212
recordtype	oai_dc
spelling	okr-10986-112122021-04-23T14:02:54Z Switching : The Role of choice in the Transition to a Funded Pension System World Bank ACCRUAL RATES ACCRUALS ACCUMULATION PERIOD ADMINISTRATIVE COSTS ADVERSE SELECTION BENEFIT FORMULA BENEFIT LEVEL BENEFIT RIGHTS CAPITAL MARKETS CONSTITUTION CONTRIBUTION RATE CONTRIBUTION RATES DEFICITS DISTORTIONARY TAXES EMPIRICAL ANALYSIS EMPIRICAL EVIDENCE EQUILIBRIUM FINANCIAL DIFFICULTIES FISCAL FISCAL BURDEN FISCAL COSTS FISCAL POLICY FISCAL PRESSURES FUNDED COMPONENT FUNDED PENSIONS GOVERNMENT REVENUES HUMAN DEVELOPMENT HUMAN DEVELOPMENT NETWORK INFLATION INFLATION RISK INSURANCE INVESTMENT RETURNS LABOR MARKETS LABOR SUPPLY LEGAL SYSTEM MARKET RISK NEW ENTRANTS PAY AS YOU GO PENSION COVERAGE PENSION FUND PENSION PLAN PENSION PLANS PENSION REFORM PENSION RIGHTS PENSION SYSTEM PENSION SYSTEM REFORM PENSIONS PERSONAL PENSIONS POLICY DECISIONS POLITICAL ECONOMY PRIVATE PENSION PRIVATE PENSION FUNDS PRIVATE PROPERTY PRIVATIZATION PRIVATIZATION PROCEEDS PUBLIC FINANCES PUBLIC INFORMATION PUBLIC SCHEMES REPLACEMENT RATE RETIREMENT RETIREMENT AGE RETIREMENT INCOME SOCIAL ASSISTANCE SOCIAL PROGRAMS SOCIAL PROTECTION SOCIAL SECURITY SOCIAL SECURITY REFORM TAXATION The transition from a wholly public, pay-as-you go pension system to one where pensions are also provided by individual, privately managed pension accounts does not directly affect those receiving pensions at the time of the reform. Nevertheless, it could affect all current and future workers. A critical policy choice is whether these workers should be allowed, encouraged or forced to divert their pension contributions to the new private element. The note continues with an in depth analysis of the spectrum of switching strategies; and further, describes the objectives of a successful reform. First, the new scheme should aim to provide a reasonable level of retirement income. Secondly, the benefit level must be consistent with long-run fiscal policy. The diversion of payroll taxes from financing current pay-as-you-go pensions into the funded scheme will increase deficits at first, so short-term fiscal constraints are also important. Thirdly, pension reform has microeconomic objectives: improve the workings of capital and labor markets. Finally, the reform must be politically palatable. Some of the note conclusions are : older workers are best excluded from reforms, because there is little time to build substantial funds in the new private scheme; a mandatory cut-off age is arbitrary and leads to political or legal challenges; and Governments can and should manage the switching process, by altering incentives and ensuring people make informed choices. 2012-08-13T14:27:47Z 2012-08-13T14:27:47Z 2005-07 http://documents.worldbank.org/curated/en/2005/07/6265567/switching-role-choice-transition-funded-pension-system http://hdl.handle.net/10986/11212 English World Bank Pension Reform Primer Series CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank Washington, DC Publications & Research :: Brief Publications & Research
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English
topic	ACCRUAL RATES ACCRUALS ACCUMULATION PERIOD ADMINISTRATIVE COSTS ADVERSE SELECTION BENEFIT FORMULA BENEFIT LEVEL BENEFIT RIGHTS CAPITAL MARKETS CONSTITUTION CONTRIBUTION RATE CONTRIBUTION RATES DEFICITS DISTORTIONARY TAXES EMPIRICAL ANALYSIS EMPIRICAL EVIDENCE EQUILIBRIUM FINANCIAL DIFFICULTIES FISCAL FISCAL BURDEN FISCAL COSTS FISCAL POLICY FISCAL PRESSURES FUNDED COMPONENT FUNDED PENSIONS GOVERNMENT REVENUES HUMAN DEVELOPMENT HUMAN DEVELOPMENT NETWORK INFLATION INFLATION RISK INSURANCE INVESTMENT RETURNS LABOR MARKETS LABOR SUPPLY LEGAL SYSTEM MARKET RISK NEW ENTRANTS PAY AS YOU GO PENSION COVERAGE PENSION FUND PENSION PLAN PENSION PLANS PENSION REFORM PENSION RIGHTS PENSION SYSTEM PENSION SYSTEM REFORM PENSIONS PERSONAL PENSIONS POLICY DECISIONS POLITICAL ECONOMY PRIVATE PENSION PRIVATE PENSION FUNDS PRIVATE PROPERTY PRIVATIZATION PRIVATIZATION PROCEEDS PUBLIC FINANCES PUBLIC INFORMATION PUBLIC SCHEMES REPLACEMENT RATE RETIREMENT RETIREMENT AGE RETIREMENT INCOME SOCIAL ASSISTANCE SOCIAL PROGRAMS SOCIAL PROTECTION SOCIAL SECURITY SOCIAL SECURITY REFORM TAXATION
spellingShingle	ACCRUAL RATES ACCRUALS ACCUMULATION PERIOD ADMINISTRATIVE COSTS ADVERSE SELECTION BENEFIT FORMULA BENEFIT LEVEL BENEFIT RIGHTS CAPITAL MARKETS CONSTITUTION CONTRIBUTION RATE CONTRIBUTION RATES DEFICITS DISTORTIONARY TAXES EMPIRICAL ANALYSIS EMPIRICAL EVIDENCE EQUILIBRIUM FINANCIAL DIFFICULTIES FISCAL FISCAL BURDEN FISCAL COSTS FISCAL POLICY FISCAL PRESSURES FUNDED COMPONENT FUNDED PENSIONS GOVERNMENT REVENUES HUMAN DEVELOPMENT HUMAN DEVELOPMENT NETWORK INFLATION INFLATION RISK INSURANCE INVESTMENT RETURNS LABOR MARKETS LABOR SUPPLY LEGAL SYSTEM MARKET RISK NEW ENTRANTS PAY AS YOU GO PENSION COVERAGE PENSION FUND PENSION PLAN PENSION PLANS PENSION REFORM PENSION RIGHTS PENSION SYSTEM PENSION SYSTEM REFORM PENSIONS PERSONAL PENSIONS POLICY DECISIONS POLITICAL ECONOMY PRIVATE PENSION PRIVATE PENSION FUNDS PRIVATE PROPERTY PRIVATIZATION PRIVATIZATION PROCEEDS PUBLIC FINANCES PUBLIC INFORMATION PUBLIC SCHEMES REPLACEMENT RATE RETIREMENT RETIREMENT AGE RETIREMENT INCOME SOCIAL ASSISTANCE SOCIAL PROGRAMS SOCIAL PROTECTION SOCIAL SECURITY SOCIAL SECURITY REFORM TAXATION World Bank Switching : The Role of choice in the Transition to a Funded Pension System
relation	World Bank Pension Reform Primer Series
description	The transition from a wholly public, pay-as-you go pension system to one where pensions are also provided by individual, privately managed pension accounts does not directly affect those receiving pensions at the time of the reform. Nevertheless, it could affect all current and future workers. A critical policy choice is whether these workers should be allowed, encouraged or forced to divert their pension contributions to the new private element. The note continues with an in depth analysis of the spectrum of switching strategies; and further, describes the objectives of a successful reform. First, the new scheme should aim to provide a reasonable level of retirement income. Secondly, the benefit level must be consistent with long-run fiscal policy. The diversion of payroll taxes from financing current pay-as-you-go pensions into the funded scheme will increase deficits at first, so short-term fiscal constraints are also important. Thirdly, pension reform has microeconomic objectives: improve the workings of capital and labor markets. Finally, the reform must be politically palatable. Some of the note conclusions are : older workers are best excluded from reforms, because there is little time to build substantial funds in the new private scheme; a mandatory cut-off age is arbitrary and leads to political or legal challenges; and Governments can and should manage the switching process, by altering incentives and ensuring people make informed choices.
format	Publications & Research :: Brief
author	World Bank
author_facet	World Bank
author_sort	World Bank
title	Switching : The Role of choice in the Transition to a Funded Pension System
title_short	Switching : The Role of choice in the Transition to a Funded Pension System
title_full	Switching : The Role of choice in the Transition to a Funded Pension System
title_fullStr	Switching : The Role of choice in the Transition to a Funded Pension System
title_full_unstemmed	Switching : The Role of choice in the Transition to a Funded Pension System
title_sort	switching : the role of choice in the transition to a funded pension system
publisher	Washington, DC
publishDate	2012
url	http://documents.worldbank.org/curated/en/2005/07/6265567/switching-role-choice-transition-funded-pension-system http://hdl.handle.net/10986/11212
_version_	1764415926752509952

Switching : The Role of choice in the Transition to a Funded Pension System

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