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The Perspective of Pension System Reforms in the New Member States

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  • Mejra Festić
  • Jože Mencinger

Abstract

Because of growing awareness of financial needs for public pensions, attention has been focused on privatisation of the pension systems. While the privatisation of pension funds can encourage development of capital markets in New Member States, equity investment in transition economies is even more volatile than in the ""old"" capitalist countries. Privatised pension system coincides with investment risks, higher administrative costs, and inability of private markets to provide retirees with affordable, indexed and certain annuities. Namely, private sector may not provide enough investment projects to efficiently absorb mandated pension savings and the expected pension income is subject to a number of risks: poor and volatile investment returns, longevity, and inflation eroding the purchasing power of pensions. Indeed, the PAYG system appears to be the only viable system to perform well in terms of risk and volatility of returns.

Suggested Citation

  • Mejra Festić & Jože Mencinger, 2009. "The Perspective of Pension System Reforms in the New Member States," Prague Economic Papers, Prague University of Economics and Business, vol. 2009(4), pages 291-308.
    • Handle: RePEc:prg:jnlpep:v:2009:y:2009:i:4:id:355:p:291-308
    DOI: 10.18267/j.pep.355
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    References listed on IDEAS

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    8. Ales Novak, 2004. "Pension system reform in Slovenia," Europe-Asia Studies, Taylor & Francis Journals, vol. 56(2), pages 279-292.
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    Cited by:

    1. Mureşan Gabriela-Mihaela & Armean Gabriel, 2016. "Trust – the Intangible Asset of Policyholder Behavior on Insurance Market," Scientific Annals of Economics and Business, Sciendo, vol. 63(s1), pages 125-136, December.
    2. Mario Holzner & Stefan Jestl & David Pichler, 2022. "Public and private pension systems and macroeconomic volatility in OECD countries," Scottish Journal of Political Economy, Scottish Economic Society, vol. 69(2), pages 131-168, May.

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    More about this item

    Keywords

    cyclicality; pay-as-you-go; ageing of population; pension funds; financial burden;
    All these keywords.

    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J48 - Labor and Demographic Economics - - Particular Labor Markets - - - Particular Labor Markets; Public Policy
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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