IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Pension funds in Central Europe and Russia : their prospects and potential role in corporate governance

  • Vittas, Dimitri
  • Michelitsch, Roland
Registered author(s):

    Social pension systems in most countries in Eastern Europe and the former Soviet Union face severe financial pressure. Aging populations are increasing that pressure, which stems mainly from in the%design in the %in the flaws and incompatible incentives in the systems. The authors describe the features of the ion systems that have led to the current dire predicament: a big discrepancy between system and demographic dependency ratios, unsustainable targeted replacement rates, the high contribution rates needed, growing evasion, and growing deficits. Radical basic reform is inevitable, they say, but may not be politically feasible or even advisable in the short run. After reviewing experience in other countries, they conclude that restructuring and downsizing the social ion system will leave adequate but affordable (thus sustainable) benefits and will allow for the creation and growth of private pension funds. The shortcomings of company-based defined benefit plans (limited portability, restricted vesting, inadequate funding) suggest that transitional economies should opt in the longer run for non-employer, defined contribution plans based on individual capitalization accounts with full immediate vesting, full portability, and full funding. To cope with the need for a targeted replacement rate, such schemes could operate with variable contribution rates, reset each year in accord with the salary growth of each worker, the cumulative investment return on his/her acount, and the targeted pension benefit. Once private pension funds are established, long-term financial resources should accumulate rapidly. They can then play a major role in modernizing securities markets, stimulating innovation, fostering better accounting and auditing standards, and promoting more disclosure of information. They could also greatly help improve corporate governance and the monitoring of corporate performance. Their"voice"in corporate affairs could be exercised more effectively through collective bodies. They could thus help create more robust structures of corporate governance, lower monitoring costs, and avoid the problems caused by"free riding".

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL: http://www-wds.worldbank.org/servlet/WDSContentServer/WDSP/IB/1995/05/01/000009265_3961019105853/Rendered/PDF/multi_page.pdf
    Download Restriction: no

    Paper provided by The World Bank in its series Policy Research Working Paper Series with number 1459.

    as
    in new window

    Length:
    Date of creation: 31 May 1995
    Date of revision:
    Handle: RePEc:wbk:wbrwps:1459
    Contact details of provider: Postal: 1818 H Street, N.W., Washington, DC 20433
    Phone: (202) 477-1234
    Web page: http://www.worldbank.org/Email:


    More information through EDIRC

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    as in new window
    1. Gray, Cheryl W. & Hanson, Rebecca J., 1993. "Corporate governance in Central and Eastern Europe : lessons from advanced market economies," Policy Research Working Paper Series 1182, The World Bank.
    2. Vittas, Dimitri & Skully, Michael, 1991. "Overview of contractual savings institutions," Policy Research Working Paper Series 605, The World Bank.
    3. Zvi Bodie, 1989. "Pensions as Retirement Income Insurance," NBER Working Papers 2917, National Bureau of Economic Research, Inc.
    4. Roe, Mark J., 1990. "Political and legal restraints on ownership and control of public companies," Journal of Financial Economics, Elsevier, vol. 27(1), pages 7-41, September.
    5. Davis, E.P. & DEC, 1993. "The structure, regulation, and performance of pension funds in nine industrial countries," Policy Research Working Paper Series 1229, The World Bank.
    6. Lakonishok, Joseph & Shleifer, Andrei & Vishny, Robert W., 1992. "The Structure and Performance of the Money Management Industry," Scholarly Articles 10498059, Harvard University Department of Economics.
    7. Zvi Bodie, 1989. "Pension Funds and Financial Innovation," NBER Working Papers 3101, National Bureau of Economic Research, Inc.
    8. Vittas, Dimitri, 1993. "Swiss Chilanpore : the way forward for pension reform?," Policy Research Working Paper Series 1093, The World Bank.
    9. Nicholas Barr, 1992. "Economic theory and the welfare state : a survey and interpretation," LSE Research Online Documents on Economics 279, London School of Economics and Political Science, LSE Library.
    10. Barr, Nicholas, 1992. "Economic Theory and the Welfare State: A Survey and Interpretation," Journal of Economic Literature, American Economic Association, vol. 30(2), pages 741-803, June.
    11. Vittas, Dimitri, 1992. "Contractual savings and emerging securities markets," Policy Research Working Paper Series 858, The World Bank.
    12. Vittas, Dimitri & Iglesias, Augusto, 1992. "The rationale and performance of personal pension plans in Chile," Policy Research Working Paper Series 867, The World Bank.
    13. Vittas, Dimitri, 1993. "Options for pension reform in Tunisia," Policy Research Working Paper Series 1154, The World Bank.
    14. Prof. Dr. Robert Holzmann, 1994. "Funded and Private Pensions for Eastern European Countries in Transition?," Public Economics 9405004, EconWPA.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:1459. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roula I. Yazigi)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.