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Individual funded pension accounts and the World Bank: evolving views

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  • Barr, Nicholas

Abstract

Introduction: This paper sets out a brief history of World Bank involvement in pensions. Section 1 considers the period 1980–2000, and in particular a major pension reform in Chile in 1981 and the World Bank’s support for that approach, discussing the reforms and how well, or otherwise, they performed. Section 2 explains increasing diversity of views within the World Bank, and section 3 the more balanced view of recent years. Objective: The main goal of the presented article is to provide a comprehensive analysis of the evolution and controversies surrounding individual funded pension accounts, with a primary focus on the Chilean model and its global impact. The article aims to critically examine the historical context, the World Bank’s role, internal and external debates, and recent developments in pension policy. Ultimately, it seeks to foster a more balanced understanding of pension systems, acknowledging their complexities, objectives beyond consumption smoothing, and the need for responsive policy adjustments in the face of real-world challenges. Materials and methods: The analysis is based on historical and policy documents, literature review, comparative analysis, qualitative assessments, and policy evaluation. Results: The main conclusion of the article is that the widespread adoption of individual funded pension accounts, as championed by the World Bank and initially implemented in Chile, has faced significant challenges and limitations. While these accounts were promoted as a panacea for pension reform challenges, the article argues that they have not lived up to their promises. Issues such as incomplete coverage, inadequate pensions, high administrative charges, gender inequality, and fiscal transition costs have raised concerns. The article also highlights a shift in recent years toward a more balanced and comprehensive approach to pension policy, emphasizing the importance of addressing poverty relief and broader social protection objectives.

Suggested Citation

  • Barr, Nicholas, 2023. "Individual funded pension accounts and the World Bank: evolving views," LSE Research Online Documents on Economics 120836, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:120836
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    File URL: https://researchonline.lse.ac.uk/id/eprint/120836/
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    References listed on IDEAS

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    1. Indermit S. Gill & Truman G. Packard & Juan Yermo, 2005. "Keeping the Promise of Social Security in Latin America," IDB Publications (Books), Inter-American Development Bank, number 59998, February.
    2. Gill, Indermit S. & Packard, Truman G. & Yermo, Juan, 2005. "Keeping the Promise of Social Security in Latin America," IDB Publications (Books), Inter-American Development Bank, number 346.
    3. Nicholas Barr & Peter Diamond, 2009. "Reforming pensions: Principles, analytical errors and policy directions," International Social Security Review, John Wiley & Sons, vol. 62(2), pages 5-29, April.
    4. repec:idb:brikps:59998 is not listed on IDEAS
    5. Nicholas Barr & Peter Diamond, 2006. "The Economics of Pensions," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 22(1), pages 15-39, Spring.
    6. András Simonovits, 2011. "The mandatory private pension pillar in Hungary: An obituary," International Social Security Review, John Wiley & Sons, vol. 64(3), pages 81-98, July.
    7. Barr, Nicholas, 2021. "Pension design and the failed economics of squirrels," LSE Research Online Documents on Economics 111927, London School of Economics and Political Science, LSE Library.
    8. Roger Beattie & Warren McGillivray, 1995. "A risky strategy: Reflections on the World Bank Report Averting the old age crisis," International Social Security Review, John Wiley & Sons, vol. 48(3‐4), pages 5-22, July.
    9. repec:wbk:wbpubs:7391 is not listed on IDEAS
    10. Andras Simonovits, 2011. "The Mandatory Private Pension Pillar in Hungary: An Obituary," KRTK-KTI WORKING PAPERS 1112, Institute of Economics, Centre for Economic and Regional Studies.
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    • G20 - Financial Economics - - Financial Institutions and Services - - - General

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