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Home : Publications :
Nonfinancial Defined Contribution Pension Schemes in a Changing Pension World
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Edited by Robert Holzmann, Edward Palmer, David Robalino
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Nonfinancial Defined Contribution (NDC) schemes are now in their
teens. The new pension concept was born in the early 1990s, implemented
from the mid-1990s in Italy, Latvia, Poland and Sweden, legislated most
recently in Norway and Egypt and serves as inspiration for other reform
countries. This innovative unfunded individual account scheme created
high hopes at a time when the world seemed to have been locked into a
stalemate between piecemeal reforms of ailing traditional defined
benefit schemes and introducing pre-funded financial account
schemes.
The experiences and conceptual issues of NDC in its childhood were
reviewed in a prior anthology (Holzmann and Palmer, 2006). This new
anthology serves to review its adolescence and with the aim of
contributing to a successful adulthood. To this end the book offers a
deep and comprehensive review of the experience of countries where NDC
schemes have been in place for a decade or more, takes stock of the
discussions of the place of NDCs in the world of pension reform, and
addresses in detail important issues related to implementation and
design, such as the of the “NDC story”, making transparent
the legacy costs, financial accounting, balancing, creation of a
reserve fund, gender, and longevity. The book also contains analyses of
the pros and cons of NDC contra FDC and a typical paygo DB scheme in
two Latin American countries.
The key policy conclusions include: (i) NDC schemes work well (as
documented by the experience of Italy, Latvia, Poland and Sweden during
the crisis) but there is room to make them work even better; (ii) Go
for an immediate transition to the new scheme to avoid future problems;
(iii) Identify the legacy costs and their explicit financing during the
transition as they will hit you otherwise soon; (iv) Adopt an explicit
stabilizing mechanism to guarantee solvency; (v) Establish a reserve
fund to guarantee liquidity; (vi) Elaborate an explicit mechanism to
share the systemic longevity risk; and, last but not least; (vii)
Address the gender implications of NDC with deeper analysis and open
political discourse.
- Shipping Weight: 1.54 lbs (0.7 kgs)
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