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Pension Reform in Slovakia: Fiscal Debt and Pension Levels

Author

Listed:
  • Igor Melicherèík
  • Cyril Ungvarský

Abstract

This paper considers two aspects of a recent pension reform in Slovakia: the financial balance of the former pay-as-you-go system, and the level of retirement pensions in a newly introduced two-pillar system. Generally, there are three important steps to sustainable pension reform: a change of pension indexation, a raised retirement age, and the launch of a fully funded (second) pillar. With regard to fiscal debt, the two-pillar system is superior to the pay-as-you-go system in the long term. Having considered the risk of returns on savings in the funded pillar, the authors show that while pensions under the two-pillar system should be higher than under a one-pillar system, it is not a certainty.

Suggested Citation

  • Igor Melicherèík & Cyril Ungvarský, 2004. "Pension Reform in Slovakia: Fiscal Debt and Pension Levels," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 54(9-10), pages 391-404, September.
  • Handle: RePEc:fau:fauart:v:54:y:2004:i:9-10:p:391-404
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    More about this item

    Keywords

    pension reform; Slovakia; fiscal debt; pension level; asset returns; risk;

    JEL classification:

    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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