On the financial sustainability of earnings-related pension schemes with ‘pay-as-you-go’ financing and the role of government-indexed bonds
AbstractIn this paper the authors reconsider the idea of an earnings-related pension system with reserves invested in indexed government bonds as a mechanism to both ensure financial sustainability and improve security. They start by reviewing the characterization of the sustainable rate of return of an earnings-related pension system with pay-as-you-go financing. The authors show that current proxies for the sustainable rate, including the Swedish"gyroscope,"are not stable and propose an alternative measure that depends on the growth of the buffer-stock and the pay-as-you-go asset. Using a simple one-sector macroeconomic model that embeds a notional account pension system they then show how GDP indexed government bonds, if combined with the right measure for the sustainable rate of return on contributions, could be used to generate a sustainable and secure earnings-related pension system, without becoming a fiscal burden. The proposal is particularly attractive for countries considering reforms to earnings-related systems that have accumulated a large implicit pension debt. In this case, the government bonds allow the financing of this debt in a transparent way. The proposed mechanism can also facilitate the transition to a fully-funded pension system when the government bonds are allowed to be traded.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Cambridge University Press in its journal Journal of Pension Economics and Finance.
Volume (Year): 8 (2009)
Issue (Month): 02 (April)
Contact details of provider:
Postal: The Edinburgh Building, Shaftesbury Road, Cambridge CB2 2RU UK
Fax: +44 (0)1223 325150
Web page: http://journals.cambridge.org/jid_PEFProvider-Email:firstname.lastname@example.org
Other versions of this item:
- Robalino, David A. & Bodor, Andras, 2006. "On the financial sustainability of earnings-related pension schemes with"pay-as-you-go"financing and the role of government indexed bonds," Policy Research Working Paper Series 3966, The World Bank.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Robalino, David & Tatyana, Bogomolova, 2006.
"lmplicit Pension Debt in the Middle-East and North Africa Magnitude and Fiscal lmplications,"
12019, University Library of Munich, Germany.
- Robalino, David & Bogomolova, Tatyana, 2006. "lmplicit Pension Debt in the Middle-East and North Africa: Magnitude and Fiscal lmplications," MPRA Paper 12016, University Library of Munich, Germany.
- David Robalino, 2005.
"Pensions in the Middle East and North Africa: Time for Change,"
World Bank Publications,
The World Bank, number 7427, August.
- Robalino, David & Whitehouse, Edward & Mataoanu, Anca & Musalem, Alberto & Sherwood, Elisabeth & Sluchynsky, Oleksiy, 2005. "Pensions in the Middle East and North Africa: time for change," MPRA Paper 10448, University Library of Munich, Germany.
- Robert Holzmann & Robert Palacios & Asta Zviniene, 2001. "On the Economics and Scope of Implicit Pension Debt: An International Perspective," Empirica, Springer, vol. 28(1), pages 97-129, March.
- Holzmann, Robert & Koettl, Johannes, 2011.
"Portability of Pension, Health, and Other Social Benefits: Facts, Concepts, Issues,"
IZA Discussion Papers
5715, Institute for the Study of Labor (IZA).
- Holzmann, Robert & Koettl, Johannes, 2011. "Portability of pension, health, and other social benefits : facts, concepts, issues," Social Protection Discussion Papers 62725, The World Bank.
- Eduardo Fajnzylber & David Robalino, 2010. "Assessing Fiscal Costs and the Distribution of Pensions in Transitions to FDC and NDC Systems: A Retrospective Analysis for Chile," Working Papers wp_005, Adolfo Ibáñez University, School of Government.
- Palmer, Edward, 2011. "Generic NDC - Equilibrium, Valuation and Risk Sharing with and without NDC Bonds," Working Paper Series 2011:3, Uppsala University, Department of Economics.
- Robalino, David A. & Vodopivec, Milan & Bodor, András, 2009.
"Savings for Unemployment in Good or Bad Times: Options for Developing Countries,"
IZA Discussion Papers
4516, Institute for the Study of Labor (IZA).
- Robalino, David & Vodopivec, Milan & Bodor, Andras, 2009. "Savings for unemployment in good or bad times : options for developing countries," Social Protection Discussion Papers 50320, The World Bank.
- Holzmann, Robert & Jousten, Alain, 2010. "Addressing the Legacy Costs in an NDC Reform: Conceptualization, Measurement, Financing," IZA Discussion Papers 5296, Institute for the Study of Labor (IZA).
- Robert Holzmann & Johannes Koettl, 2012. "Portability of Pension, Health, and other Social Benefits: Facts, Concepts, and Issues," CESifo Working Paper Series 4002, CESifo Group Munich.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Keith Waters).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.