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A Case for Partial Funding of Pensions with an Application to the EU Candidate Countries

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  • Heikki Oksanen

Abstract

The paper examines the effects of ageing and makes a case for partial pre-funding of pensions. The argument is based on inter-generational fairness in a situation where pension expenditure as compared to wages increases due to low fertility and increasing longevity. We illustrate the approach by using data representing a typical EU Candidate Country of Central and Eastern Europe with a relatively high pension replacement rate. Pre-funding can take place within the public sector or in a privatised second pillar. We emphasise the need for a consistent framework to cover the many different institutional options available for pension financing.

Suggested Citation

  • Heikki Oksanen, 2001. "A Case for Partial Funding of Pensions with an Application to the EU Candidate Countries," CESifo Working Paper Series 466, CESifo.
    • Handle: RePEc:ces:ceswps:_466
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    References listed on IDEAS

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    1. Cremer, Helmuth & Pestieau, Pierre, 2000. "Reforming our pension system: Is it a demographic, financial or political problem?," European Economic Review, Elsevier, vol. 44(4-6), pages 974-983, May.
    2. Robin Brooks, 2000. "What Will Happen To Financial Markets When The Baby Boomers Retire?," Computing in Economics and Finance 2000 92, Society for Computational Economics.
    3. Sinn, Hans-Werner, 1997. "The Value of Children and Immigrants in a Pay-As-You-Go Pension System: A Proposal For a Partial Transition to a Funded System," CEPR Discussion Papers 1734, C.E.P.R. Discussion Papers.
    4. Jukka Lassila & Tarmo Valkonen, 2001. "Pension Prefunding, Ageing, and Demographic Uncertainty," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 8(4), pages 573-593, August.
    5. Mr. Robin Brooks, 2000. "What Will Happen to Financial Markets When the Baby Boomers Retire?," IMF Working Papers 2000/018, International Monetary Fund.
    6. Jukka Lassila & Tarmo Valkonen, 2002. "Prefunding in a Defined Benefit Pension System: The Finnish Case," NBER Chapters, in: Social Security Pension Reform in Europe, pages 263-290, National Bureau of Economic Research, Inc.
    7. Mr. N. A. Barr, 2000. "Reforming Pensions: Myths, Truths, and Policy Choices," IMF Working Papers 2000/139, International Monetary Fund.
    8. Feldstein, Martin & Liebman, Jeffrey B., 2002. "Social security," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 32, pages 2245-2324, Elsevier.
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    Cited by:

    1. Heikki Oksanen, 2003. "Population ageing and public finance targets," European Economy - Economic Papers 2008 - 2015 196, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    2. Heikki Oksanen, 2001. "Pension Reforms for Sustainability and Fairness," CESifo Forum, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 2(04), pages 12-18, October.
    3. Heikki Oksanen, 2001. "Pension Reforms for Sustainability and Fairness," CESifo Forum, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 2(4), pages 12-18, October.
    4. Oksanen, Heikki, 2003. "A nyugdíjreformtervek a jóléti államokban - öregedő népesség esetén [Pension-reform blueprints for welfare states under ageing populations]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(7), pages 654-670.
    5. Evelin, Ahermaa & Luigi, Bernardi, 2004. "Tax polici in new EU members: Estonia and othr Baltic states," MPRA Paper 18158, University Library of Munich, Germany.
    6. K. Mc Morrow & W. Röger, 2002. "EU pension reform - An overview of the debate and an empirical assessment of the main policy reform options," European Economy - Economic Papers 2008 - 2015 162, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    7. Hans-Werner Sinn, 2005. "Europe’s Demographic Deficit A Plea For A Child Pension System," De Economist, Springer, vol. 153(1), pages 1-45, December.
    8. Sinn, Hans-Werner, 2005. "Europe's Demographic Deficit," Munich Reprints in Economics 934, University of Munich, Department of Economics.

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