Trends in retirement systems and lessons for reform

Olivia Mitchell

No 1118, Policy Research Working Paper Series from The World Bank

Abstract: In multiple-pillar retirement systems, the government provision of old-age income support plays a very different role from vehicles for encouraging private retirement savings - and for the government regulation and insurance of private savings. Despite the diversity of public and private retirement systems, and despite their wealth and their potential impact on labor and capital markets, they are often overlooked in structural analyses of country problems and prospects. The author examines important institutional features of retirement systems in industrial and developing countries and outlines what is known about their economic effects. She also identifies ways in which public and private retirement systems affect economic adjustment, paying special attention to the costs and benefits of encouraging early retirement. She finds that a coherent plan for retirement reform must identify how much old-age income security is affordable, how the government and private sector can address failures in the private market to provide this security, and how these objectives can be attained given available financing mechanisms. The author finds evidence that many retirement systems will be forced to change a great deal in the next few decades. In some cases: retirement benefits will have to be reduced (perhaps by imposing a means test); the age for early retirement will have to be raised; multiple-pillar plans will have to be integrated and streamlined to rationalize work incentives; and incentives and opportunities for private saving will be increased. In any case, using high-cost long-term retirement systems to mitigate short- and medium-term unemployment problems will probably prove costly and inefficient as a solution to problems faced by economies in transition.

Keywords: Health Monitoring&Evaluation; Labor Markets; Banks&Banking Reform; Pensions&Retirement Systems; Labor Management and Relations (search for similar items in EconPapers)
Date: 1993-03-31
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