A critical question in the transition to a funded, private pension system is whether the new private element is presented as a mandate or choice to current and future workers. This paper sets out the spectrum of available options and looks at policy in 13 reforming countries. It concludes that older workers are best excluded from reform, because the economic benefits are small and the political resistance is likely to be large if they are included. However, a defined cut-off age is arbitrary for reasons of intergenerational equity and heterogeneity of portfolio composition and risk preferences within cohorts. A voluntary switch is preferred. The main objection is the resulting uncertainty over the numbers switching. Analysis of reforming countries shows however, a consistent and rational pattern of switching. The paper concludes by discussing policy options for managing the switching process.
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number
14176.
Find related papers by JEL classification: H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions G23 - Financial Economics - - Financial Institutions and Services - - - Pension Funds; Other Private Financial Institutions D14 - Microeconomics - - Household Behavior - - - Personal Finance
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