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Pension Reform in Hungary: A Preliminary Assessment

Autor: Rocha, Roberto; Vittas, Dimitri
Año: 2001
Resumen: Hungary is entering the fourth year of a multi-pillar pension reform that has proved popular among workers despite initially lukewarm support from the government that succeeded the reforming government, and despite the poor initial performance of capital markets because of Russia's crisis in 1998. Roughly half the labor force joined the new system voluntarily. Most who switched were younger than 40. Many people switched to the system because it offered more risk diversification. The pay-as-you-go (PAYG) system, which had been severely damaged by repeated manipulation of its parameters, clearly offered a low return on contributions. The new system is still predominantly PAYG. The first pillar accounts for more than two-thirds of the total contribution, but the new second pillar offers the chance of higher average returns on contributions. Most workers probably intuited the risk and returns inherent in a pure PAYG system and mixed system, including the capital market risk in the second pillar and the political risk in the PAYG pillar. The new system offers better prospects of long-run risk-adjustment returns for young workers, and most young workers effectively opted for the new system. But the new system was probably oversold as well, making older workers - who would be better off staying in the reformed PAYG system - switch too. The government has so far decided not to increase the contribution to the second pillar from 6 to 8 percent, as originally planned, so efficiency gains in labor and capital markets may also be smaller than expected. Addressing projected deficits in the PAYG system may require further adjustments, such as delaying the retirement age and shifting to indexed prices, reducing net benefits to future generations. Reform has sharply reduced the severe initial bias against future generation but hasn't eliminated it altogether. The voluntary switching strategy achieves the same outcome as a forced switch based on an arbitrarily cutoff age, while preventing legal problems and contributing to the reduction of the implicit pension debt. But it leaves a few individuals worse of the if they'd chosen their best option - a problem a well-designed public information campaign can reduce.

Fuente: https://hdl.handle.net/10986/19596
Clasificación: Reformas de Pensiones
Tipo de Publicación: Documentos de Trabajo
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Generational Accounting and Hungarian Pension Reform

Autor: Gál, Róbert I.; Simonovits, András; Tarcali, Géza
Año: 2001
Resumen: The essence of generational accounting is to break down total net contributions in a given year to each cohort and to project this profile into the future. Using additional assumptions on the discount rate and the growth of productivity and population, the per capita net contribution of future generations can be determined, which satisfies the inter-temporal budget constraint. Generational accounts in the Hungarian pension system show that the 1997 reform package significantly reduced the financial tension generated by demographic and institutional factors.

Fuente: Banco Mundial
Clasificación: Reformas de Pensiones
Tipo de Publicación: Documentos de Trabajo
Idioma:

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Generational Accounting and Hungarian Pension Reform

Autor: Gál, Róbert I.; Simonovits, András; Tarcali, Géza
Año: 2001
Resumen: The essence of generational accounting is to break down total net contributions in a given year to each cohort and to project this profile into the future. Using additional assumptions on the discount rate and the growth of productivity and population, the per capita net contribution of future generations can be determined, which satisfies the inter-temporal budget constraint. Generational accounts in the Hungarian pension system show that the 1997 reform package significantly reduced the financial tension generated by demographic and institutional factors.

Fuente: Banco Mundial
Clasificación: Reformas de Pensiones
Tipo de Publicación: Documentos de Trabajo
Idioma:

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Implicit Pension Debt, Transition Cost, Options, and Impact of China's Pension Reform: A Computable General Equilibrium Analysis

Autor: Wang, Yan; Xu, Dianqing; Wang, Zhi; Zhai, Fan
Año: 2001
Resumen: The main problems with China's pension system--the pension burdens of state enterprises and the agency of the population--have deepened in recent years. Using a new computable general equilibrium model that differentiates between three types of enterprise ownership and 22 groups in the labor force, the authors estimate the effects of pension reform in China, comparing various options for financing the transition cost. They examine the impact that various reform options would have on the system's sustainability, on overall economic growth, and on income distribution. The results are promising. The current pay-as-you-go system, with a notional individual account, remains unchanged in the first scenario examined. Simulations show this system to be unsustainable. Expanding coverage under this system would improve financial viability in the short run but weaken it in the long run. Other scenarios assume that the transition cost will be financed by various taxes and that a new, fully funded individual account will be established in 2001. The authors compare the impact of a corporate tax, a value-added tax, a personal income tax, and a consumption tax. They estimate the annual transition cost to be about 0.6 percent of Gross Domestic Product (GDP) between 2000 and 2010, declining to 0.3 percent by 2050. Using a personal income tax to finance the transition cost would best promote economic growth and reduce income inequality. Levying a social security tax and injecting fiscal resources to finance the transition costs would help make the reformed public pillar sustainable. To finance a benefit of 20 percent of the average wage, a contribution rate of only 10 percent-12.5 percent would be enough to balance the basic pension pillar. Gradually increasing the retirement age would further reduce the contribution rate.

Fuente: Banco Mundial
Clasificación: Reformas de Pensiones
Tipo de Publicación: Documentos de Trabajo
Idioma:

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Critical Issues in Social Security

Autor: Banco Mundial
Año: 2001
Resumen: Social security is the single most important fiscal issue facing the Brazilian government today. This report summarizes the state, and potential policy implications, of the Brazilian Social security system. It also discusses policy recommendations for: social security and pensions, the national social security system, government pensions and funds, and the complementary pension systems. An overview of the social security challenge reviews the system components, revealing unsustainable fiscal imbalances and administrative weaknesses in both the unreformed General Regime for Social Security (RGPS), and the Pension Regime for Government Workers (RJU), with large tax-related distortions, and labor market inefficiency. Thus the goals of Brazil's reforms are to reduce fiscal deficits, lower actuarial imbalances, increase equity and redistribution, reduce collateral inefficiencies, and facilitate growth of funded pensions. The study implies there is no recourse for the country, but to lower the high, uniform replacement rates (experience suggests that rates higher than 40-70 percent, cannot be sustained). The key to effective reform of social security is widening the debate to include potential winners from these changes, particularly the private sector, the young, and the poor. Policy recommendations suggest that the adverse equity effects of RGPS reforms should be widely publicized to generate political support for deeper RJU reform.

Fuente: Banco Mundial
Clasificación: Seguridad Social y Sistemas de Pensiones
Tipo de Publicación: Informes
Idioma:

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