SOCIAL SECURITY PENSIONS

Transcription

1 SOCIAL SECURITY PENSIONS Development and reform Edited by Colin Gillion John Turner Clive Bailey Denis Latulippe International Labour Office Geneva

2 CONTENTS Preface Acknowledgements The International Labour Organization Abbreviations v xvii xxi xxiii 1 General overview and main issues 1 About this book 1 The climate of change 3 Public and non-public pension programmes 3 Development: The structure of pension schemes and their problems 5 Reform: The search for a new balance 14 Introduction to the regional briefs 19 Introduction to the technical briefs 22 2 Public and non-public pension schemes 29 The public-private mix in developing countries 29 The public-private mix in developed and middle-income countries 30 Overview of the historical development of the public-private mix in developed countries 31 Effects of the public sector on the size of the private sector 32 The choice between public and private 35 Reasons for privatization 36 Part I Development: The structure of pension schemes and their problems 39 3 Retirement benefits 41 Entitlement conditions 41 Benefit amount 45 Form in which benefits are received, 51 Progressivity 65 vii

3 4 Invalidity and survivors' benefits 69 Invalidity pensions 69 Invalidity schemes within national social protection schemes 74 How invalidity benefit schemes influence behaviour 76 Employment-related schemes 82 Encouraging employment 83 Conclusions on invalidity pensions 87 Survivors' benefits 87 Equity and coverage problems 91 Conclusions on survivors' benefits 95 5 Pensioners and social assistance benefits 98 A taxonomy of social assistance 98 The size of social assistance 99 The structure of social assistance 102 Level and structure of social assistance for pensioners Financing pension systems 126 The development of pension expenditures 127 Financing social security pensions 132 Sources of financing 138 Contribution schemes 140 Conclusions: Policy choices The management of investment 154 Investment in the context of four models of funded mandatory retirement pension schemes 155 Financial and economic preconditions for developing funded pension schemes 158 Management issues for mandatory retirement benefit funds 165 Required regulation and necessary regulatory capabilities 173 Investment performance of mandatory funded schemes Coverage and its shortfalls 193 Trends in population coverage 193 Reasons for exclusion from coverage 198 Approaches to the extension of coverage 203 Schemes for informal sector workers Governance and administration 217 Objectives of good governance 217 The stakeholders ' 219 The fundamental governance questions 227 Problems at the institutional level 239 Problems with administration at the operational level Contribution evasion 251 The problem of evasion 251 The prevalence of evasion 254 viii

4 Contribution evasion compared to tax evasion 255 Reasons for contribution evasion 255 Reasons why governments tolerate evasion or are unable to prevent it Pension transfers and the redistribution of income 270 Intergenerational redistribution 272 Intragenerational redistribution 288 The structure of pension schemes The risks to individuals 301 Demographic risks 302 Economic risks 306 Political risks 315 Institutional risks 317 Individual risks 319 Annex: Pension guarantees Economic effects 336 Desired economic effects of social security retirement benefit schemes 337 Labour market effects 341 The link between national savings and economic growth 353 The link between personal saving and national saving The consequences for public finances 367 Pensions in national and government accounts 367 Financial links between pension schemes and government accounts 370 Financial flows from pension schemes to government accounts 371 Flows and links between government accounts and pension schemes 372 The effect of pension financing on public deficits and debt 376 Pension financing and public financing strategies 380 Annex: Pensions in the hierarchy of government accounts in Turkey 386 Conclusion to Part I 390 Part II Reform: The search for a new balance The normative basis for policy 395 The guiding principles of pension reform and development 399 Implications of the principles Extending coverage 409 Extending existing social insurance schemes 410 Adapting existing social insurance schemes 412 Special schemes for the self-employed and the informal sector 413 Developing tax-financed pension schemes Improving governance, management and compliance 424 Planning, policy and coordination issues 424 Institutional issues Reviewing public/private responsibility for pensions 427 ix

5 Making public social security institutions more effective 430 Improving the collection of contributions 431 The unification of social security schemes 433 Conclusions Influencing the age of retirement 437 Retirement and retirement policy 437 Policy options 443 Policy considerations 443 Postponed retirement 449 Other government policies affecting retirement age Developing pluralistic designs and flexible structures 453 Determinants of the structure of retirement income schemes 455 The structure of retirement income schemes 464 First tier 468 Second tier 473 Defined benefit versus defined contribution plans 475 Annex: Administrative costs in public and private pension plans: What makes the difference? The reform process and its political management 487 Different reform processes 487 Reaching consensus on social security reform 488 Implementing reform 494 Conclusion to Part II 496 Regional Briefs Asia and the Pacific 499 Socioeconomic overview 499 Overview of social security systems 500 Existing pension arrangements 504 Major developments and reform initiatives Africa 515 Social protection and economic development in Africa 517 Issues relating to pension arrangements ] 519 Developments and objectives Latin America and the Caribbean, 532 Historical perspective 533 Coverage 534 Benefits 536 Pensionable age 536 Minimum period of contributions 537 Financing 537 The pension reform movement 540 Conclusion 545

6 4 Arab states of the Middle East 546 Socioeconomic overview 547 Social security retirement benefit programmes Central and Eastern Europe 553 Socioeconomic overview 553 Overview of social protection systems 554 Retirement, invalidity and survivors' benefits 555 Conceptual deficiencies and priority problems The OECD countries 576 Overview of the economic environment 577 Overview of OECD social security systems 577 Issues in social security retirement income reform 583 Conclusions: Trends in social security 596 Technical Briefs The quantitative modelling of pension reform and development 598 The social budget model 599 The pension model 602 Modelling distributional effects Social security Conventions and Recommendations of the ILO 609 Social Security (Minimum Standards) Convention, 1952 (No. 102) Pensions for public sector employees 618 The variety of retirement schemes available to employees in the public sector 619 Linkage to national pension schemes: Separate or integrated? 619 Pension coverage 620 Public sector trends and policy issues 621 Appendix I 624 Appendix II The impact of demography 630 Case-based projection for immature schemes 630 Typical cost developments 631 Sensitivity testing 634 Statistical annex 637 The demography of pensions 639 Employment and retirement of older workers 659 Pension coverage 675 Sources and level of retirement income 681 Investments and capital markets 701 Glossary 707 Bibliography 713 Index 745 xi