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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 ...

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Paper provided by OECD Publishing in its series OECD Development Centre Working Papers with number 126.

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Date of creation: Aug 1997
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Handle: RePEc:oec:devaaa:126-en
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