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Fiscal Alternatives of Moving from Unfunded to Funded Pensions


  • Robert Holzmann


The reform of public pension systems has become a key policy issue in many countries. Because conventional approaches to reform largely unfunded retirement income schemes prove politically and economically difficult, attention has focused on the option of a partial shift towards funded provisions. Yet this too presents problems. This paper outlines the potential benefits of such a shift and highlights the main fiscal options and constraints. The liabilities to the current generation of retirees and workers under an unfunded pension scheme constitute a huge, hidden public debt. Most countries find that making this implicit debt fully explicit, repaying it and thus reversing the initial redistribution towards the start-up generation, lie beyond their political, economic and fiscal capacities. Thus, a shift requires simultaneous steps of the following sort: (i) a benefit reform of the unfunded scheme, reducing the implicit debt; (ii) a redesign of the basic tier remaining unfunded, to ... La réforme des systèmes publics d’assurance vieillesse est devenue un enjeu des politiques publiques dans un grand nombre de pays. Les approches classiques pour réformer en profondeur les régimes de retraite par répartition sont difficiles à mettre en œuvre aux niveaux politique et économique, aussi évoque-t-on de plus en plus la possibilité d’une réorientation partielle vers des systèmes de retraite par capitalisation. Toutefois, cette stratégie pose également problème. Ce document souligne les avantages potentiels d’une telle orientation et met en évidence les principales options et contraintes budgétaires. Les engagements pris envers la génération actuelle de retraités et d’actifs dans le cadre d’un système de répartition représentent un endettement public énorme et qui n’apparaît pas de manière officielle. La plupart des gouvernants considèrent que transformer cette dette implicite en un endettement totalement explicite, la rembourser et, ce faisant réaffecter la redistribution ...

Suggested Citation

  • Robert Holzmann, 1997. "Fiscal Alternatives of Moving from Unfunded to Funded Pensions," OECD Development Centre Working Papers 126, OECD Publishing.
  • Handle: RePEc:oec:devaaa:126-en

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    References listed on IDEAS

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    Cited by:

    1. Volker Meinhardt & Katja Rietzler & Rudolf Zwiener, 2009. "Konjunktur und Rentenversicherung - gegenseitige Abhängigkeiten und mögliche Veränderungen durch diskretionäre Maßnahmen," IMK Studies 03-2009, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    2. 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.
    3. Palacios, Robert & Whitehouse, Edward, 1998. "The Role of Choice in the Transition to a Funded Pension System," MPRA Paper 14176, University Library of Munich, Germany.
    4. James, Estelle, 1997. "New systems for old age security - theory, practice, and empirical evidence," Policy Research Working Paper Series 1766, The World Bank.
    5. James,Estelle, 1997. "Pension reform : is there a tradeoff between efficiency and equity?," Policy Research Working Paper Series 1767, The World Bank.
    6. Dilshodjon Alidjonovich Rakhmonov, 2016. "Improvement of the Pension System in Uzbekistan: Through the Experience of the European Union Countries," Eurasian Journal of Economics and Finance, Eurasian Publications, vol. 4(1), pages 80-90.
    7. Gora, Marek & Rutkowski, Michal, 1998. "The quest for pension reform : Poland's security through diversity," Social Protection and Labor Policy and Technical Notes 20111, The World Bank.
    8. Alvaro Forteza, 1998. "Los efectos de la Reforma uruguaya de la Seguridad Social en el ahorro," Documentos de Trabajo (working papers) 1098, Department of Economics - dECON.
    9. Holzmann, Robert & Jousten, Alain, 2010. "Addressing the Legacy Costs in an NDC Reform: Conceptualization, Measurement, Financing," IZA Discussion Papers 5296, Institute for the Study of Labor (IZA).
    10. Fabrizio Balassone & Daniele Franco, 2000. "Public investment, the Stability Pact and the ‘golden rule’," Fiscal Studies, Institute for Fiscal Studies, vol. 21(2), pages 207-229, June.
    11. Palacios, Robert & Rocha, Roberto, 1998. "The Hungarian pension system in transition," Social Protection and Labor Policy and Technical Notes 20048, The World Bank.
    12. James, Estelle, 1998. "New Models for Old-Age Security: Experiments, Evidence, and Unanswered Questions," World Bank Research Observer, World Bank Group, vol. 13(2), pages 271-301, August.

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