Addressing the Legacy Costs in an NDC Reform: Conceptualization, Measurement, Financing
The paper provides a framework for the conceptualization, definition and estimation of legacy costs that need to be addressed in a reform that transforms an unfunded defined contribution (NDB) scheme into a notional (or non-financial) defined contribution (NDC) scheme. As the new contribution rate is fixed and, perhaps, reduced, paying for the accrued to date liabilities leaves a financing gap that needs to be estimated and financed, best outside the pension system if a less distorting financing form is available. The paper illustrates the proposed measurement approach with broad estimates under a hypothetical NDC reform in China.
|Date of creation:||Oct 2010|
|Date of revision:|
|Publication status:||published in: Edward Palmer, Robert Holzmann and David Robalino, Nonfinancial Defined Contribution Pension Schemes in a Changing Pension World: Volume 2, Gender, Politics, and Financial Stability, World Bank, 2013, 277-304|
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- Holzmann, Robert & Palacios, Robert & Zviniene, Asta, 2004. "Implicit pension debt: issues, measurement and scope in international perspective," Social Protection and Labor Policy and Technical Notes 30153, The World Bank.
- Holzmann, Robert, 1998. "Financing the transition to multipillar," Social Protection and Labor Policy and Technical Notes 20052, The World Bank.
- Robert Holzmann, 1997. "Fiscal Alternatives of Moving from Unfunded to Funded Pensions," OECD Development Centre Working Papers 126, OECD Publishing.
- Robalino, David A. & Bodor, Andras, 2006.
"On the financial sustainability of earnings-related pension schemes with"pay-as-you-go"financing and the role of government indexed bonds,"
Policy Research Working Paper Series
3966, The World Bank.
- Robalino, David A. & Bodor, András, 2009. "On the financial sustainability of earnings-related pension schemes with ‘pay-as-you-go’ financing and the role of government-indexed bonds," Journal of Pension Economics and Finance, Cambridge University Press, vol. 8(02), pages 153-187, April.
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