Policies to Promote Saving for Retirement : A Synthetic Overview
The author argues that public and private pillars are essential for a well-functioning pension system. Public pillars, funded or unfounded, offer basic benefits that are independent of the performance of financial markets. Since financial markets s...
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
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World Bank, Washington, D.C.
2013
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| Online Access: | http://documents.worldbank.org/curated/en/2002/03/1733735/policies-promote-saving-retirement-synthetic-overview http://hdl.handle.net/10986/14840 |
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okr-10986-14840 |
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oai_dc |
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Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English en_US |
| topic |
ADEQUATE DISCLOSURE ADMINISTRATIVE COSTS ADVERSE SELECTION AFFILIATES ANNUITY ANNUITY CONVERSION ANNUITY CONVERSION FACTOR ANNUITY MARKETS ANNUITY PAYMENT ANNUITY PROVIDERS ASSET DIVERSIFICATION ASSET MANAGERS ASSETS ASYMMETRIC INFORMATION AUDITS BONDS CAPITAL MARKETS CAPITALIZATION COMPETITIVE MARKETS COMPULSORY PARTICIPATION CONTRACTUAL SAVINGS PLANS CONTRIBUTION PERIOD CONTRIBUTION RATE CONTRIBUTION SYSTEMS CREDIT UNIONS CROWDING CROWDING OUT DEPOSITS DISCOUNT RATE ECONOMIC GROWTH ECONOMISTS EMPLOYMENT EXTERNAL CUSTODY FINANCIAL INSTITUTIONS FINANCIAL MARKETS FINANCIAL SECTOR FUNDED PENSION SYSTEMS HEALTH CARE HOUSING INCOME GROUPS INDIVIDUAL ACCOUNTS INFLATION INSURANCE COMPANIES INSURANCE PREMIUMS INVESTMENT PERFORMANCE INVESTMENT RETURN LAWS LIFE ANNUITIES LIFE EXPECTANCY LIFE INSURANCE LIQUIDITY LONGEVITY INSURANCE MACROECONOMIC POLICIES MARKET DISTORTIONS MEDICAL CARE MORAL HAZARD MULTI-PILLAR SYSTEMS MUTUAL FUNDS NORMAL RETIREMENT AGE OCCUPATIONAL PENSION PLANS OCCUPATIONAL PENSIONS OPERATING COSTS OPERATING EFFICIENCY OPPORTUNITY COSTS PENSION FUND PENSION FUND MANAGEMENT PENSION PLANS PENSION REFORM PENSION RIGHTS PENSION SYSTEM PENSIONERS PERSONAL PENSION PLANS POLICY RESEARCH PRESENT VALUE PRIVATE MANAGEMENT PRIVATE PENSION PRIVATE PENSION FUNDS PRIVATE PILLARS PRODUCTION TECHNOLOGY PROVIDENT FUNDS PUBLIC AGENCIES PUBLIC PILLAR REGULATORY FRAMEWORK REINVESTMENT RISK REPLACEMENT RATE RETIREMENT RETIREMENT AGE RETIREMENT INCOME RETIREMENT SAVINGS SAVING PLANS SAVINGS ACCOUNTS SCHEDULED WITHDRAWALS SECURITIES SOCIAL ASSISTANCE SOCIAL SECURITY SOCIAL SECURITY SYSTEMS SUPERVISORY FRAMEWORK TAX RATE TAX TREATMENT TAXATION UNEMPLOYMENT VALUATION VARIABLE ANNUITIES WAGE GROWTH RETIREMENT INCOME SAVINGS CAPITAL MARKETS INVESTMENT REGULATION INVESTMENT FUNDS TAX INCENTIVES DEFINED CONTRIBUTION PLANS PENSION COVERAGE |
| spellingShingle |
ADEQUATE DISCLOSURE ADMINISTRATIVE COSTS ADVERSE SELECTION AFFILIATES ANNUITY ANNUITY CONVERSION ANNUITY CONVERSION FACTOR ANNUITY MARKETS ANNUITY PAYMENT ANNUITY PROVIDERS ASSET DIVERSIFICATION ASSET MANAGERS ASSETS ASYMMETRIC INFORMATION AUDITS BONDS CAPITAL MARKETS CAPITALIZATION COMPETITIVE MARKETS COMPULSORY PARTICIPATION CONTRACTUAL SAVINGS PLANS CONTRIBUTION PERIOD CONTRIBUTION RATE CONTRIBUTION SYSTEMS CREDIT UNIONS CROWDING CROWDING OUT DEPOSITS DISCOUNT RATE ECONOMIC GROWTH ECONOMISTS EMPLOYMENT EXTERNAL CUSTODY FINANCIAL INSTITUTIONS FINANCIAL MARKETS FINANCIAL SECTOR FUNDED PENSION SYSTEMS HEALTH CARE HOUSING INCOME GROUPS INDIVIDUAL ACCOUNTS INFLATION INSURANCE COMPANIES INSURANCE PREMIUMS INVESTMENT PERFORMANCE INVESTMENT RETURN LAWS LIFE ANNUITIES LIFE EXPECTANCY LIFE INSURANCE LIQUIDITY LONGEVITY INSURANCE MACROECONOMIC POLICIES MARKET DISTORTIONS MEDICAL CARE MORAL HAZARD MULTI-PILLAR SYSTEMS MUTUAL FUNDS NORMAL RETIREMENT AGE OCCUPATIONAL PENSION PLANS OCCUPATIONAL PENSIONS OPERATING COSTS OPERATING EFFICIENCY OPPORTUNITY COSTS PENSION FUND PENSION FUND MANAGEMENT PENSION PLANS PENSION REFORM PENSION RIGHTS PENSION SYSTEM PENSIONERS PERSONAL PENSION PLANS POLICY RESEARCH PRESENT VALUE PRIVATE MANAGEMENT PRIVATE PENSION PRIVATE PENSION FUNDS PRIVATE PILLARS PRODUCTION TECHNOLOGY PROVIDENT FUNDS PUBLIC AGENCIES PUBLIC PILLAR REGULATORY FRAMEWORK REINVESTMENT RISK REPLACEMENT RATE RETIREMENT RETIREMENT AGE RETIREMENT INCOME RETIREMENT SAVINGS SAVING PLANS SAVINGS ACCOUNTS SCHEDULED WITHDRAWALS SECURITIES SOCIAL ASSISTANCE SOCIAL SECURITY SOCIAL SECURITY SYSTEMS SUPERVISORY FRAMEWORK TAX RATE TAX TREATMENT TAXATION UNEMPLOYMENT VALUATION VARIABLE ANNUITIES WAGE GROWTH RETIREMENT INCOME SAVINGS CAPITAL MARKETS INVESTMENT REGULATION INVESTMENT FUNDS TAX INCENTIVES DEFINED CONTRIBUTION PLANS PENSION COVERAGE Vittas, Dimitri Policies to Promote Saving for Retirement : A Synthetic Overview |
| relation |
Policy Research Working Paper;No.2801 |
| description |
The author argues that public and
private pillars are essential for a well-functioning pension
system. Public pillars, funded or unfounded, offer basic
benefits that are independent of the performance of
financial markets. Since financial markets suffer from
prolonged, persistent, and large deviations from long-term
trends, they cannot be relied on as the sole provider of
pension benefits. Funded pillars provide benefits that are
based on long-term capital accumulation and financial market
performance. But they need to be privately managed to
minimize dependence on public sector institutions and avoid
government dominance of the economy and financial markets.
The author focuses mainly on the promotion, structure, and
regulation of funded pillars. He discusses the case for
using compulsion and tax incentives, for exempting some
categories of workers such as the very young (under 25), the
very old (over the normal retirement age), the very poor
(those earning less than 40 percent of the average wage),
and the self-employed, and for offering a credit transfer to
be added to individual capitalization accounts to encourage
participation by lower-income groups. A robust regulatory
framework with a panoply of prudential and protective rules
covering "fit and proper" tests, asset
diversification and market valuation rules, legal
segregation of assets and safe external custody, independent
financial audits and actuarial reviews, and adequate
disclosure and transparency would be essential. An
effective, proactive, well-funded, and properly staffed
supervision agency would be necessary. Tight investment
rules could initially be justified for countries with weak
capital markets and limited tradition of private pension
provision. But in the long run, adoption of the
"prudent expert" approach with publication of
"statements of investment policy objectives"
(SIPOs) would be preferable and more efficient. Various
guarantees covering aspects such as minimum pension levels
and relative investment returns need to be provided to
protect workers from aberrant asset managers and insolvency
of annuity providers, but care must be taken to address
effectively the risk of moral hazard. The author also argues
for greater individual choice, including the creation of a
dual regulatory structure. One part would involve heavy
regulation with constrained choice of investment funds,
limits on operating fees and on account switching, and
strong government safeguards and guarantees. This would
cater to those workers with low risk tolerance. The other
part would be more liberal but based on strong conduct
rules. It would offer greater choice of investment funds,
allowing multiple accounts and liberal account switching,
impose no limits on operating fees, and providing no or
fewer state guarantees. This would cater to workers seeking
a higher return and who are willing to tolerate a higher
level of risk. |
| format |
Publications & Research :: Policy Research Working Paper |
| author |
Vittas, Dimitri |
| author_facet |
Vittas, Dimitri |
| author_sort |
Vittas, Dimitri |
| title |
Policies to Promote Saving for Retirement : A Synthetic Overview |
| title_short |
Policies to Promote Saving for Retirement : A Synthetic Overview |
| title_full |
Policies to Promote Saving for Retirement : A Synthetic Overview |
| title_fullStr |
Policies to Promote Saving for Retirement : A Synthetic Overview |
| title_full_unstemmed |
Policies to Promote Saving for Retirement : A Synthetic Overview |
| title_sort |
policies to promote saving for retirement : a synthetic overview |
| publisher |
World Bank, Washington, D.C. |
| publishDate |
2013 |
| url |
http://documents.worldbank.org/curated/en/2002/03/1733735/policies-promote-saving-retirement-synthetic-overview http://hdl.handle.net/10986/14840 |
| _version_ |
1764429665247690752 |
| spelling |
okr-10986-148402021-04-23T14:03:19Z Policies to Promote Saving for Retirement : A Synthetic Overview Vittas, Dimitri ADEQUATE DISCLOSURE ADMINISTRATIVE COSTS ADVERSE SELECTION AFFILIATES ANNUITY ANNUITY CONVERSION ANNUITY CONVERSION FACTOR ANNUITY MARKETS ANNUITY PAYMENT ANNUITY PROVIDERS ASSET DIVERSIFICATION ASSET MANAGERS ASSETS ASYMMETRIC INFORMATION AUDITS BONDS CAPITAL MARKETS CAPITALIZATION COMPETITIVE MARKETS COMPULSORY PARTICIPATION CONTRACTUAL SAVINGS PLANS CONTRIBUTION PERIOD CONTRIBUTION RATE CONTRIBUTION SYSTEMS CREDIT UNIONS CROWDING CROWDING OUT DEPOSITS DISCOUNT RATE ECONOMIC GROWTH ECONOMISTS EMPLOYMENT EXTERNAL CUSTODY FINANCIAL INSTITUTIONS FINANCIAL MARKETS FINANCIAL SECTOR FUNDED PENSION SYSTEMS HEALTH CARE HOUSING INCOME GROUPS INDIVIDUAL ACCOUNTS INFLATION INSURANCE COMPANIES INSURANCE PREMIUMS INVESTMENT PERFORMANCE INVESTMENT RETURN LAWS LIFE ANNUITIES LIFE EXPECTANCY LIFE INSURANCE LIQUIDITY LONGEVITY INSURANCE MACROECONOMIC POLICIES MARKET DISTORTIONS MEDICAL CARE MORAL HAZARD MULTI-PILLAR SYSTEMS MUTUAL FUNDS NORMAL RETIREMENT AGE OCCUPATIONAL PENSION PLANS OCCUPATIONAL PENSIONS OPERATING COSTS OPERATING EFFICIENCY OPPORTUNITY COSTS PENSION FUND PENSION FUND MANAGEMENT PENSION PLANS PENSION REFORM PENSION RIGHTS PENSION SYSTEM PENSIONERS PERSONAL PENSION PLANS POLICY RESEARCH PRESENT VALUE PRIVATE MANAGEMENT PRIVATE PENSION PRIVATE PENSION FUNDS PRIVATE PILLARS PRODUCTION TECHNOLOGY PROVIDENT FUNDS PUBLIC AGENCIES PUBLIC PILLAR REGULATORY FRAMEWORK REINVESTMENT RISK REPLACEMENT RATE RETIREMENT RETIREMENT AGE RETIREMENT INCOME RETIREMENT SAVINGS SAVING PLANS SAVINGS ACCOUNTS SCHEDULED WITHDRAWALS SECURITIES SOCIAL ASSISTANCE SOCIAL SECURITY SOCIAL SECURITY SYSTEMS SUPERVISORY FRAMEWORK TAX RATE TAX TREATMENT TAXATION UNEMPLOYMENT VALUATION VARIABLE ANNUITIES WAGE GROWTH RETIREMENT INCOME SAVINGS CAPITAL MARKETS INVESTMENT REGULATION INVESTMENT FUNDS TAX INCENTIVES DEFINED CONTRIBUTION PLANS PENSION COVERAGE The author argues that public and private pillars are essential for a well-functioning pension system. Public pillars, funded or unfounded, offer basic benefits that are independent of the performance of financial markets. Since financial markets suffer from prolonged, persistent, and large deviations from long-term trends, they cannot be relied on as the sole provider of pension benefits. Funded pillars provide benefits that are based on long-term capital accumulation and financial market performance. But they need to be privately managed to minimize dependence on public sector institutions and avoid government dominance of the economy and financial markets. The author focuses mainly on the promotion, structure, and regulation of funded pillars. He discusses the case for using compulsion and tax incentives, for exempting some categories of workers such as the very young (under 25), the very old (over the normal retirement age), the very poor (those earning less than 40 percent of the average wage), and the self-employed, and for offering a credit transfer to be added to individual capitalization accounts to encourage participation by lower-income groups. A robust regulatory framework with a panoply of prudential and protective rules covering "fit and proper" tests, asset diversification and market valuation rules, legal segregation of assets and safe external custody, independent financial audits and actuarial reviews, and adequate disclosure and transparency would be essential. An effective, proactive, well-funded, and properly staffed supervision agency would be necessary. Tight investment rules could initially be justified for countries with weak capital markets and limited tradition of private pension provision. But in the long run, adoption of the "prudent expert" approach with publication of "statements of investment policy objectives" (SIPOs) would be preferable and more efficient. Various guarantees covering aspects such as minimum pension levels and relative investment returns need to be provided to protect workers from aberrant asset managers and insolvency of annuity providers, but care must be taken to address effectively the risk of moral hazard. The author also argues for greater individual choice, including the creation of a dual regulatory structure. One part would involve heavy regulation with constrained choice of investment funds, limits on operating fees and on account switching, and strong government safeguards and guarantees. This would cater to those workers with low risk tolerance. The other part would be more liberal but based on strong conduct rules. It would offer greater choice of investment funds, allowing multiple accounts and liberal account switching, impose no limits on operating fees, and providing no or fewer state guarantees. This would cater to workers seeking a higher return and who are willing to tolerate a higher level of risk. 2013-08-06T20:08:45Z 2013-08-06T20:08:45Z 2002-03 http://documents.worldbank.org/curated/en/2002/03/1733735/policies-promote-saving-retirement-synthetic-overview http://hdl.handle.net/10986/14840 English en_US Policy Research Working Paper;No.2801 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, D.C. Publications & Research :: Policy Research Working Paper Publications & Research |