Addressing the Legacy Costs in an NDC Reform: Conceptualization, Measurement, Financing

Robert Holzmann and Alain Jousten

No 5296, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: 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.

Keywords: coverage expansion; legacy costs; pension reform; NDC (search for similar items in EconPapers)
JEL-codes: H55 H68 J21 J26 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2010-10
New Economics Papers: this item is included in nep-age, nep-pub and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Published - 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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