Building Voluntary Pension Schemes in Emerging Economies
After the financial crisis, some Central and Eastern Europe countries partially or totally reversed the pension reforms they had initiated in the previous two decades. In the presence of an aging population in the region, reductions in replacement...
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| Language: | English en_US |
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World Bank, Washington, DC
2016
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| Online Access: | http://documents.worldbank.org/curated/en/2016/08/26628945/building-voluntary-pension-schemes-emerging-economies http://hdl.handle.net/10986/24860 |
| Summary: | After the financial crisis, some Central
and Eastern Europe countries partially or totally reversed
the pension reforms they had initiated in the previous two
decades. In the presence of an aging population in the
region, reductions in replacement rates will be the most
likely adjustment mechanism for the social security systems
to remain fiscally sustainable. In some other emerging
economies, mandatory funded schemes are operating with low
contribution rates, and policy makers have not been able to
pass legislation to increase the contribution rate to ensure
adequate pensions for future retirees. Voluntary pension
schemes that take into consideration the behavioral aspects
of individuals may provide a viable solution for countries
that need to increase retirement savings but face political
resistance to mandatory increases in contribution rates. The
proposed mechanism shifts the focus of voluntary pension
plans from "opt-in" to "opt-out"
schemes. The emphasis is in setting the default options in a
way that employees have to make an explicit decision if they
do not want to contribute to the pension system. The paper
builds on the experiences of several countries, including
Italy, New Zealand, the United Kingdom, and the United
States, and proposes policy recommendations and good
practices for building voluntary pension systems. These
opt-out schemes should be able to provide high coverage
among white and blue collar workers, and consequently
improve the future pensions of individuals. |
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