1. FIAP June 1, 2007 Varna, Bulgaria
Pension Reform Perspectives in Europe Hermann von Gersdorff Sector Manager Social Protection World Bank
FIAP
June 1, 2007 Varna, Bulgaria

2. Enhancing Job Opportunities in ECA
First Considerations ….
Reform initiation and progress of countries is weakly linked to reform needs
Perfect designed scheme neither necessary nor sufficient for successful reform and implementation
stays on the shelf
gets discussed but does not receive support
gets implemented but is politically not sustainable
Political economy of reforms crucial for success, but have limited understanding
Arrogance of economists? Yes, perhaps
Limited reform experience? No, not anymore
Enhancing Job Opportunities in ECA

3. Enhancing Job Opportunities in ECA
Second Considerations …
Elements of reform trigger experience:
Regional diffusion process: Keeping-up with the neighbor(s)
Credible paradigm change or reform fantasy?
Information and communication matter ….
Elements of reform completion experience:
Pension reform must be part and parcel of comprehensive reform program
Long-term commitment by government(s) essential
Luck – no external and/or internal shocks ….
Enhancing Job Opportunities in ECA

4. Third Considerations … Suggested Key Elements of Success
Quality technical content of the concept
Translated into policies
….translated into programs
….translated into practices
Enhancing Job Opportunities in ECA

5. Triggers for Reform Valid: Dependency Ratios 2000-2050
Enhancing Job Opportunities in ECA

6. Enhancing Job Opportunities in ECA
A Proposed Framework
COMMITMENT-BUILDING
COALITION-BUILDING
IMPLEMENTATION
Enhancing Job Opportunities in ECA

7. Enhancing Job Opportunities in ECA
COUNTRIES EMBARKING ON NEW SYSTEMIC PENSION REFORM
Romania: since 1996, actually passed and derogated pension reform law, expected to launch in 2008.
Armenia: Design and Commitment Building Phase, but in a rush
Serbia: lost reform champion, likely to stay introduce only voluntary pensions
Albania: Commitment at Central Government
Kyrgyz R., did NDC and still pursuing reform
Ukraine: legislated framework in 1998 and expected to launch 2008.
Without plans for Systemic Reform: Belarus, Czech R., Moldova, Slovenia
Enhancing Job Opportunities in ECA

8. Some Unsolved Problems: Female Pensions
Enhancing Job Opportunities in ECA

9. Some Unresolved Problems: Coverage
Enhancing Job Opportunities in ECA

10. Status of Reformed Pension Schemes
Bulgaria (2002): achieved to increase contribution to funded pension system. Issues, level of existing pensions and number of disability pensions.
Poland (1999): big challenge in benefits payout system.
Hungary (1998): has overcome large challenges, issue of fiscal deficit
Croatia (2002): slow erosion through PAYGO reform reversals
Enhancing Job Opportunities in ECA

11. Status of Reformed Pension Schemes: Replacement Rate
Enhancing Job Opportunities in ECA

12. Status of Reformed Pension Schemes
Slovakia (2005): Issues, level of recalculated pensions and large number of participants (Euro/Eurostat).
Russia (2002): late launch led to non-supportive Government, at risk.
Macedonia (2005): been solving pre-condition challenges successfully
Kazakhstan (1998): level of benefits and return on funds
Enhancing Job Opportunities in ECA

13. Status of Reformers: Rate of Return
Enhancing Job Opportunities in ECA

14. Enhancing Job Opportunities in ECA
References
Holzmann, R., Richard Hinz, and Bank Team, Old-Age Income Support in the Twenty-first Century: An International Perspective on Pension Systems and Reform, Washington, DC: World Bank. Chapter 6.
Holzmann, Robert, Michael Orenstein, and Michal Rutkowski, eds Pension Reform in Europe: Progress and Process. Washington, DC: World Bank.
Orenstein, Mitchell “How Politics and Institutions Affect Pension Reform in Three Postcommunist Countries.” Policy Research Working Paper 2310, Development Research Group, Macroeconomics and Growth, World Bank, Washington, DC.
Enhancing Job Opportunities in ECA