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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.

In high-income countries, the percent of the population covered under mandatory old-age pension programs is typically high but often incomplete; in low- and middle-income countries, coverage is low and even stagnant. At the same time, older people are less able to rely on family and community support as a result of growing urbanization and migration. And low-income workers and the poor simply cannot save enough to prepare for their old age. As a response, many countries are considering or have already implemented various forms of retirement income transfers aiming to guarantee a minimum level of income during old age. Despite the growing popularity of these programs, research assessing their success has been limited. 'Closing the Coverage Gap: The Role of Social Pensions and Other Retirement Income Transfers' brings together a group of renowned academics, policy analysts, and policy makers working in the area of pensions and public policy. They discuss how social pensions and other retirement income transfers can be used to close the coverage gap of mandatory pension systems: how they operate, when they can be appropriate, and how to make them work. The book reviews the experiences of low-, middle-, and high-income countries with the design and implementation of retirement income transfers. The book analyzes design issues related to financing, incentives, targeting mechanisms, and administration, and also identifies the role of promising instruments such as matching contributions to reach parts of the informal sector.

This paper analyzes the performance of the Bulgarian private defined contribution pensions in the second and third pillars of the pension system.

Derived pension rights (including survivor benefits and spousal compensations for one-earner couples) exist in most Social Security systems but with variable generosity. They are mainly viewed as a means to alleviate poverty among older women living alone. The purpose of this paper is to explain how they can emerge from a political economy process when Social Security is a combination of Bismarckian and Beveridgean pillars. We find that the pension system should be contributive but with a positive level of derived rights. We also show that such a system encourages stay-at-home wives, thus revealing an unpleasant trade-off between female labor participation and poverty alleviation.

This paper reviews developments in pension systems in 11 transition economies during the 1990s, highlighting the forces behind their rapid weakening. It focuses on the challenges these systems face—including those arising from demographic factors—and discusses why most transition countries are considering shifting, or have already shifted, from traditional defined-benefit pay-as-you-go systems to defined-contribution fully funded systems. Finally, the paper looks at the main options that arise in introducing fully funded components, including the relative mix between funding and pay-as-you-go, and the speed of the transition toward the new system.

We document that the strength of negatively reciprocal inclinations affects workers’ reaction to unfair treatment. We exploit unique matched survey and administrative data on male public sector employees in the Netherlands and compare the job motivation of employees born in 1950, who faced a substantial retrenchment of their pension rights resulting from a pension reform in 2006, to that of slightly older employees who remained entitled to more generous pension benefits. Job motivation is significantly lower among negatively reciprocal employees who were affected by the reform. The adverse effect on job motivation is stronger for negative reciprocal employees born very shortly after the cutoff date of January 1, 1950, as well as for those with many unaffected colleagues, who perceive the policy change as being more unfair. The treatment effect is stronger among workers who are more likely to hold their employer accountable for the drop in their pension rights. Data, as supplemental material, are available at http://dx.doi.org/10.1287/mnsc.2015.2157 . This paper was accepted by Uri Gneezy, behavioral economics .

This paper argues that the brunt of the reform-induced increase in Polish social expenditures has been borne by social insurance arrangements (mainly pensions and unemployment compensation) rather than by social assistance schemes targeted to the poor or more temporary social safety net schemes. This is largely due to ease of access to social security and its more attractive benefit structure. Much of recent social expenditure reform had an ad-hoc nature and was driven by the need to alleviate looming financial distress. A major policy challenge is to avoid a further burdening of social security by needs that should be addressed by basic income support and emergency assistance policies or by general transfers (e.g., family allowances). Current reform needs are illustrated by using unemployment benefits and pensions as examples.

Gender penalties in pension outcomes are widely acknowledged and have been documented for majority populations in various settings. A recurring finding is that the gendered impact of family formation on work–care trajectories adversely affects women's accumulation of pension rights over the lifecourse relative to men. Although maternal employment is particularly low in migrant populations, few papers have explicitly addressed pension protection of migrant women. Using longitudinal microdata from the Belgian Social Security Registers, we analyse whether entry into parenthood differentially affected the build-up of first pillar pension rights of working-age migrant women compared to natives between 1998 and 2010, further distinguishing by origin group and migrant generation. The results show that native women are most likely to build up pension rights through full-time employment both before and after parenthood. In contrast, first-generation women and women of Turkish and Moroccan origin are more likely to build up pension rights though assimilated periods or rely on derived pension rights after parenthood, even when controlling for type of pension build-up before parenthood. We conclude that policies reinforcing individualisation of pension rights based on employment or decreasing the importance of derived rights may erode pension protection of groups having limited access to the labour market, and require co-ordination with employment and family policies that support the combination of work and care responsibilities.