Going backwards? Analysis of the reversal of systemic pension reforms in Central and Eastern Europe...
-
date post
20-Dec-2015 -
Category
Documents
-
view
218 -
download
1
Transcript of Going backwards? Analysis of the reversal of systemic pension reforms in Central and Eastern Europe...
Going backwards?Analysis of the reversal of systemic pension reforms in Central and Eastern Europe
Edward WhitehouseHead of Pension Policy Analysis
Social Policy divisionOECD
2
Reformed systems: parameters
Type of public scheme
DC contribution rate
Reduction in earnings-related
benefit
Estonia Basic + points 4+2% 20%
Hungary DB 68% 26%
Poland NDC 7.3% 37%
Slovak Republic Points 9% 50%
Latvia NDC 210% 44%
Lithuania Basic + DB 3.55.5% 52%
Switching behaviour
0%
25%
50%
75%
100%
20 25 30 35 40 45 50 55 60 65
men
women
Estonia 2005
switc
h p
roh
ibite
d
0%
25%
50%
75%
100%
20 25 30 35 40 45 50 55 60 65
men
women
Hungary 2000
0%
25%
50%
75%
100%
20 25 30 35 40 45 50 55 60 65
men
women
Poland 1999
switc
h
pro
hib
ited
switc
h m
an
da
tory
Slovak Republic 2005
0%
25%
50%
75%
100%
20 25 30 35 40 45 50 55 60 65
40
.25
.5
.75
1
1.25
Gro
ss r
epla
cem
ent
rate
0 .25 .5 .75 1 1.25 1.5 1.75 2Individual earnings, proportion of average earnings
DC Earnings-related
0
.25
.5
.75
1
1.25
Gro
ss r
epla
cem
ent
rate
0 .25 .5 .75 1 1.25 1.5 1.75 2Individual earnings, proportion of average earnings
DC Earnings-related
Reformed systems: replacement rates
0
.25
.5
.75
1
1.25
Gro
ss r
epla
cem
ent
rate
0 .25 .5 .75 1 1.25 1.5 1.75 2Individual earnings, proportion of average earnings
DC Earnings-related Basic
EU-27 average
OECD-34 average
Estonia Hungary
Slovak Republic
0
.25
.5
.75
1
1.25
Gro
ss r
epla
cem
ent
rate
0 .25 .5 .75 1 1.25 1.5 1.75 2Individual earnings, proportion of average earnings
DC Earnings-related
Poland
50
.25
.5
.75
1
1.25
Gro
ss r
epla
cem
ent
rate
0 .25 .5 .75 1 1.25 1.5 1.75 2Individual earnings, proportion of average earnings
DC Earnings-related
0
.25
.5
.75
1
1.25
Gro
ss r
epla
cem
ent
rate
0 .25 .5 .75 1 1.25 1.5 1.75 2Individual earnings, proportion of average earnings
DC Earnings-related Basic
0
.25
.5
.75
1
1.25
Gro
ss r
epla
cem
ent
rate
0 .25 .5 .75 1 1.25 1.5 1.75 2Individual earnings, proportion of average earnings
DC Earnings-related
0
.25
.5
.75
1
1.25
Gro
ss r
epla
cem
ent
rate
0 .25 .5 .75 1 1.25 1.5 1.75 2Individual earnings, proportion of average earnings
DC Earnings-related
Reformed systems: replacement rates
EU-27 average
OECD-34 average
Bulgaria Latvia
Lithuania Romania
6
Distributional impact of reform: Poland
0
25
50
75
0.5 0.75 1 1.25 1.5Individual earnings
(multiple of economy-wide average)
Gross replacement rate(per cent)
Post-reform
Post-reform
Reduction in replacement rate
Pre-reform
Pre-reform
Reduction in replacement rate
Increase in replacement rate
7
Switching and reform reversals:replacement rates
Replacement rates (%) Changes in
pensions (%) Switcher
Non-
switcher Total Public
Public Private Total
Public pension pension
Estonia 25.9 15.0 40.9
29.2 -28.5 +13.1 Hungary 44.4 31.4 75.8
60.1 -20.8 +35.2
Poland – men 23.4 30.2 53.7
37.4 -30.3 +59.7 Poland – women 17.6 22.1 39.7
28.1 -29.3 +59.7
Slovak Republic 26.0 31.6 57.5
51.9 -9.7 +100.0
Poland: impact of changes on replacement rate
8
0
10
20
30
40
50
60
Before After Before After
Gross replacement rate, per cent
Men WomenTotal 53.7%
Total45.2% Total
39.7%Total 33.6%
9
Switching and reform reversals:replacement rates
Results based on OECD standard assumptions
2% earnings growth
3.5% net investment return
both in real terms
What matters for replacement rate from defined-contribution schemes is difference between earnings growth and investment return
Calculate neutral rate of return that equalises replacement rates
Wage growth – 5% for Estonia
Wage growth – 1.6% for Hungary
Wage growth – 2.0% M, – 2.3% F for Poland
Wage growth + 0.6% for Slovak Republic
10
Slovak Republic
0
2.5
5
7.5
10
12.5
15
17.5
2007 2010 2015 2020 2025 2030 2035 2040 2045 2050 2055 2060
Per cent of GDP
Public
Private
0
2.5
5
7.5
10
12.5
15
17.5
2007 2010 2015 2020 2025 2030 2035 2040 2045 2050 2055 2060
Per cent of GDP
Public
Private
0
2.5
5
7.5
10
12.5
15
17.5
2007 2010 2015 2020 2025 2030 2035 2040 2045 2050 2055 2060
Per cent of GDP
Public
Private
Long-term financial projections
0
2.5
5
7.5
10
12.5
15
17.5
2007 2010 2015 2020 2025 2030 2035 2040 2045 2050 2055 2060
Per cent of GDP
Public
Private
Estonia Hungary
Poland
110
2.5
5
7.5
10
12.5
15
17.5
2007 2010 2015 2020 2025 2030 2035 2040 2045 2050 2055 2060
Per cent of GDP
Public
Private
0
2.5
5
7.5
10
12.5
15
17.5
2007 2010 2015 2020 2025 2030 2035 2040 2045 2050 2055 2060
Per cent of GDP
Public
Private
0
2.5
5
7.5
10
12.5
15
17.5
2007 2010 2015 2020 2025 2030 2035 2040 2045 2050 2055 2060
Per cent of GDP
Public
Private
0
2.5
5
7.5
10
12.5
15
17.5
2007 2010 2015 2020 2025 2030 2035 2040 2045 2050 2055 2060
Per cent of GDP
Public
Private
Romania
Long-term financial projectionsBulgaria Latvia
Lithuania
12
Conclusions: the OECD vision for retirement-income provision
Pension policy is about achieving a balance between adequacy and sustainability
A balanced pension system is a good thing
A mix of public and private provision
A mix of pay-as-you-go and pre-funding
A redistributive pension system is a good thing
With fiscal constraints, best to target public benefits on those most in need