Nonfinancial Defined Contribution Pension Schemes in a Changing Pension World : Volume 2. Gender, Politics, and Financial Stability
The concept of nonfinancial (notional) defined contribution (NDC) was born in the early 1990s and implemented from the mid-1990s in a number of countries. This innovative unfunded individual account scheme emerged and created high hopes at a time w...
| Main Authors: | , , |
|---|---|
| Language: | English en_US |
| Published: |
Washington, DC: World Bank
2013
|
| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2012/01/16988689/nonfinancial-defined-contribution-pension-schemes-changing-pension-world http://hdl.handle.net/10986/12212 |
| Summary: | The concept of nonfinancial (notional)
defined contribution (NDC) was born in the early 1990s and
implemented from the mid-1990s in a number of countries.
This innovative unfunded individual account scheme emerged
and created high hopes at a time when the world seemed to
have been locked into a stalemate between making piecemeal
reforms of ailing traditional pay- as-you-go defined benefit
schemes and introducing prefunded financial account schemes.
Nonfinancial (notional) defined contribution (NDC) plans are
designed to eliminate the work disincentives and
nontransparent redistributions of defined benefit (DB)
social security schemes without the transition costs and
risk shifting that occurs in the context of a switch to a
funded defined contribution (DC) scheme. To a large extent,
they sweep away the special privileges that, intentionally
or inadvertently, accrue to various groups in traditional
schemes and pay everyone in accordance with his or her own
contributions. However, not surprisingly, these new
provisions will have different effects on diverse population
subgroups, including men and women. Most of the effects do
not stem from explicit gender-specific provisions in the
plans, but rather from the interaction of gender-free
policies with differing demographic and employment
characteristics of men and women. The same policies affect
the two genders differently because of the more limited
labor force attachment of women as a result of their
childbearing and childrearing roles, their lower earnings
when they do work, their longer life expectancy, and the
likelihood that they will eventually become widows and live
alone in very old age. Both financial defined contribution
(FDC) and NDC plans make certain design choices explicit
that are implicit in DB plans. Although this feature allows
for more informed decision making, it can also be
politically sensitive and divisive. In some cases, the
decision process is simpler for NDC plans than for FDC
plans. NDC plans do not have individual investments and,
therefore, do not have the problems that FDCs face and that
stem from decentralized investment decisions. |
|---|