Taking stock of pension reforms around the world

Abstract

Countries around the world are reforming their pension systems. Most are reforming to reduce thefiscal costs of their existing pension systems. A few young countries are establishing new systems or are increasing the generosity of their current systems, although perhaps not always taking into account the future fiscal costs entailed in the increased generosity. The purpose of the paper is to provide a brief summary and evaluation of recent pension reforms around the world. Section 2 briefly discusses why so many countries had to reform in recent years. Section 3 describes different types of potential reform options. Section 4 provides statistics on which reform options the countries are choosing. Section 5 provides an evaluation of different reform options taking into account fiscal, intergenerational and political economy costs. The last section concludes that the only way to effectively solve the pension system issue on a permanent basis is to move toward the fully-funded defined contribution reforms currently underway in Latin America, Australia, Poland, and Kazakhstan under consideration in a variety of other countries.

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