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Pension trusts --- Pension trusts.

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"This note adds to the existing literature by examining the enabling conditions for the creation of mandatory funded pension funds, and identifying additional factors that are important to consider in the early stages of the reform. The note stresses the importance of some factors that had already been identified in previous literature but not fully observed by reforming countries, including the strong and lasting commitment of the authorities with the reform, the fiscal commitment with the reform, and some basic financial infrastructure. The analysis is also extended to analyze the role of supervision in the early stages of the reform and the role of the government in fostering the development of the domestic capital market. "--World Bank web site.

Pension trusts.

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"Following Chile's pension reform in 1981, a wave of multi-pillar pension reforms took place in Latin America (LAC). Their implementation has revealed new policy challenges. To shed light on these issues, this paper reviews the structure and performance of mandatory DC pillars in LAC. The review highlights three important points. First, it suggests overall positive outcomes from reforms in the LAC countries that implemented multi-pillar pension systems. There is, however, scope for increasing efficiency. Second, management fees have declined but remain relatively high whereas decreases in operational costs have only been partially passed through to consumers reflecting inadequate competition. Limits on transfers and related measures have been ineffective in curtailing management fees but created new barriers to entry. In recent years, a few countries in LAC introduced or are in the process of introducing a combination of new measures that focus more directly on the two root causes of inadequate competition - the inelasticity of demand to fees and selective elimination of barriers to entry by facilitating unbundling of services. These new measures show some promise. Third, the paper's review indicates that a greater diversification of pension fund portfolios in LAC appears to be necessary. Portfolio concentration owes to the adoption of strict quantitative investment regulations, underdeveloped capital markets and volatile macroeconomic environments. A gradual relaxation of these restrictions is now in progress in several countries. Regulators have become more conscious of the costs imposed by such regulations and macroeconomic conditions have improved. Greater overseas diversification seems inevitable given the development stage of local capital markets. "--World Bank web site.

Pension trusts

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Recent social security reform has significantly improved the long-run sustainability of the pension system. However, the pension system continues to serve as an important barrier to a more rapid expansion of the formal-sector economy in two ways. First, early-retirement incentives (including severance payments) continue to push many incumbent formal sector workers into the informal sector, often at ages as young as 40-45. While new labour force entrants face a much higher retirement age, policies for incumbents are fiscally expensive, inequitable, and serve to swell the ranks of the informal sector. Second, even when the transition to the new pension rules is complete, net replacement rates will remain very high by OECD standards, requiring high social security contribution rates that make it too expensive for firms to employ low-skilled labour in the formal sector. Thus, further pension reform is one of the keys to overcoming Turkey's economic duality. Finally, since the pension system does not cover the informal sector, it does little to alleviate poverty among the wider population of older people. This paper discusses a number of reforms that would increase the retirement age, reduce inter-generational inequities, and permit a significant cut in the tax wedge on labour, while better addressing old-age poverty concerns at all levels of income.

Pension trusts.

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Pension trusts