CEE Transition from PAYG to Private Pensions: Income Gaps and Asset Allocation

Ales S. Berk (), Mitja Cok, Marko Kosak and Joze Sambt
Additional contact information
Ales S. Berk: University of Ljubljana, Faculty of Economics
Mitja Cok: University of Ljubljana, Faculty of Economics
Marko Kosak: University of Ljubljana, Faculty of Economics
Joze Sambt: University of Ljubljana, Faculty of Economics

Czech Journal of Economics and Finance (Finance a uver), 2013, vol. 63, issue 4, 360-381

Abstract: Rapid population aging driven by low fertility and increasing longevity requires further adjustments of the traditional pension frameworks in Central and Eastern Europe (CEE). In this article we analyze the pension systems of the Czech Republic, Hungary, Poland, Slovakia, and Slovenia and show firstly that fiscal limitations are expected to significantly reduce PAYG pensions in CEE countries given the current and projected demographic dynamics. Secondly, we show that existing private pension plans will not be able to fill the gap to the desirable replacement rate. Without implementation of additional pension saving plans during the active period, there is a threat that many individuals will fall below the poverty line after retirement. Thirdly, we argue that the success of such pension plans will crucially depend on asset allocation decisions. Hence, governments should implement financial literacy programs in order to promote less conservative, more profitable asset allocation decisions by individuals over the longer run.

Keywords: PAYG; private pensions; financial literacy; old-age income; Central and Eastern Europe; transition economics (search for similar items in EconPapers)
JEL-codes: G11 J14 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://journal.fsv.cuni.cz/storage/1280_360-381-berk.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fau:fauart:v:63:y:2013:i:4:p:360-381

Access Statistics for this article

More articles in Czech Journal of Economics and Finance (Finance a uver) from Charles University Prague, Faculty of Social Sciences Contact information at EDIRC.
Bibliographic data for series maintained by Natalie Svarcova ().