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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.

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.

Using household survey data linked to supervisory data of Dutch pension funds, we provide evidence of the increase in household savings caused by shocks to the financial position of pension funds. Our identification strategy exploits cross-sectional and time variations in pension funds’ funding ratios, which result from asset allocations and price corrections outside the control of fund members. The findings reveal that fluctuations in funding ratios significantly impact household savings, with a displacement effect above 40 percent. Lower funding ratios are associated with higher voluntary savings, driven primarily by members of pension funds with lower historical returns. Unlike earlier studies, this paper covers a long time span including three major economic crises, providing novel insights into the interaction between pension fund stability and individual saving behaviour.

Increasing use of life insurance instruments and company-sponsored funds in France suggests that French households may be inclined to a greater reliance on financial savings as a source of retirement income. This paper examines the challenges imposed by an aging population on the pay-as-you-go basic and supplementary pension systems, the growth of life insurance and company-sponsored funds in the absence of a comprehensive legislation on prefunded pensions, and issues related to prefunding pension schemes, such as the possibility of an welfare enhancing transition to prefunding; effects on capital markets in view of the experience in other OECD countries; and the importance of the transportability of pensions and measures fostering competition in financial markets.

The Chilean pension reform of 1981, in which Chile moved from an unfunded to a funded scheme, is considered to have contributed to this country's excellent economic performance since the mid-1980s. The paper highlights the theoretical underpinnings of the claimed economic effects and presents empirical data and preliminary econometric testing of the conjectured growth, capital formation, and saving effects. The empirical evidence is consistent with most of the claims. In particular, the direct impact of financial market development on private saving is found to be negative, which underscores the importance of sound fiscal policy and public saving to support the transition.

Purpose: The objective of this work is to highlight the various reform measures to be undertaken in order to ensure the sustainability of general pension schemes, in particular those aimed at promoting the partial capitalization of pensions in Algeria.   Theoretical framework: Like most countries in the world, the Algerian pension system, which is managed on a PAYG basis, is currently facing major funding problems. Indeed, despite the measures taken to reduce its financial deficit, the latter has persisted since 2013 and has been estimated at almost 2.7 billion USD at the end of 2022. In fact, if measures to lay the foundations for sustained growth, which creates jobs (with improved inclusion in social security), are taken by the government, the system could regain its balance in the short and medium term. However, the problem of population ageing, which could occur in a few decades, reminds the urgent need for structural reforms.   Design/Methodology/Approach: The design of the study is descriptive and analytical. Data for this study were collected from official Algerian sources, namely the NRF and the NOS, while content analysis was conducted by interpreting these data.   Findings: The results of this study show that the Algerian public authorities have taken many measures in recent years to fill the deficit in the pension system, of which the repeal at the end of 2016 of the early and unconditional age pensions with possibility of maintaining the activity until the age of 65, the establishment of the NPRF in 2006, the introduction of additional revenue from customs duties applied to goods import operations from 2020, and the introduction of the NSSF in 2021. Nevertheless, this would in no way escape the insolvency of the pension scheme, hence the need for a structural reform that targets in addition to parametric changes, the introduction of a capitalization dose complementing the current pension system (supplementary pension) for its rebalancing in the short, medium and long term.   Conclusion: the availability of substantial oil revenues may downplay the importance of the financial problems facing the Algerian pension system and their impact on budget stability (according to the NRF, the fund’s deficit stood at 376 billion DZD in 2022 and could reach 1.200 billion DZD in 2030), whereas this oil boom should be used to finance the transition by adopting a partially funded pension scheme. At the same time, this would require more efforts to boost the stock market in order to create an environment conducive to the establishment and development of this funded pillar.

All countries in the former transition economies of Central, Eastern, and Southern Europe have undertaken public pension reforms of varying depth and orientation, often with the support of the World Bank. Although the reformed public pension schemes provide broad benefit adequacy, in most cases additional measures are needed to achieve fiscal sustainability in an aging society. 'Adequacy of Retirement Income after Pension Reforms in Central, Eastern, and Southern Europe: Eight Country Studies' assesses the benefit adequacy of the reformed pension systems for eight countries—Bulgaria, the Czech Republic, Croatia, Hungary, Poland, Romania, the Slovak Republic, and Slovenia—to identify policy gaps and options. The authors identify the motivations for reform against the backdrop of the trend toward multi-pillar arrangements, document key provisions, and compare them in the context of the World Bank's five-pillar paradigm for pension reform. They then evaluate the sustainability and adequacy of reformed pension systems and provide recommendations to address gaps and take advantage of opportunities for further reforms. The case studies and summary suggest the following broad policy conclusions: • Fiscal sustainability has improved in most study countries, but few are fully prepared for the inevitability of population aging. • The linkage between contributions and benefits has been strengthened, and pension system designs are better suited to market conditions • Levels of income replacement are generally adequate for all but some categories of workers (including those with intermittent formal sector employment or low lifetime wages), and addressing their needs requires initiatives that go beyond pension policy. • Further reforms should focus on extending labor force participation by the elderly to avoid benefit cuts that could undermine adequacy and very high contribution rates that could discourage formal sector employment. • More decisive financial market reforms are needed for funded provisions to deliver on the expectations of participants and keep funded pensions safe. This book will be of interest to policy makers, researchers, and everyone interested in the topic of pensions in the region, and beyond.

In the USSR in 1990, social security reforms led to the imposition of a uniform system of benefits in a large and demographically diverse country. This required inter-regional transfers, which are now no longer feasible with the demise of the USSR. Relatively high contribution rates also pose a problem for a nascent commercialized sector. The paper argues that benefit levels in some former Soviet Union countries are now unsustainable. The price shock associated with the \"transition\" to a market economy should lead to a consideration of a \"mix\" of policies, including a basic benefit in kind. While funded systems may eventually reduce contribution rates, there are implementation difficulties in the medium term.

This paper stems from the observation that there are two worldwide trends, pension reform and population ageing, and asks whether the two may be related. Exploring the cases of pension reform in different countries, we find that, although they are very different, the cases share a common characteristic: they shift risks away from workers towards those who are retired. Furthermore, population ageing, by increasing the weight of the elderly relative to working generations, raises the price of intergenerational risk sharing. Combining these findings, we argue and show formally that pension reform can be seen as a welfare-best response to population ageing.

The second and third tiers of the pension system provide a significant accumulation of financial resources, which are stored for an extended period in the pension accounts of its participants. The long-term use of pension assets requires their protection from various financial risks, as well as the possibility of using them in investment activities on the stock market. The article aims to analyze the legal basis for the functioning and outline the priority areas of development of the stock market in Ukraine, determine its role in protecting the pension assets of the funded pension system, and review the main financial instruments used to manage pension assets. Since the primary function of the stock market is to redistribute investment resources and ensure production financing, its development should be focused on supporting the effective functioning of the funded pension system and guaranteeing reliable protection of the pension assets of its participants. However, today, the Ukrainian stock market does not yet fully meet the requirements that mandatory state-funded pension programs may impose. In particular, the stock market offers a limited number of reliable financial instruments for investing the assets of funded pension programs. Specialized financial institutions that will be engaged in investing the financial resources of the second tier of the pension system remain underdeveloped. The article examines the main instruments of the stock market used to manage pension assets. The traditional investment strategy for a pension fund is to allocate its assets between bonds, stocks and real estate. The new trend is to invest money in alternative investments for higher returns and greater diversification. It was revealed that in the conditions of Ukrainian realities, an urgent issue remains increasing public confidence in the stock market, the low level of which is one of the main barriers to developing pension investments. In addition, one of the priorities for further developing the stock market in Ukraine is creating a stable and transparent regulatory framework and introducing an effective fiscal mechanism for regulating investment activity.