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On the Financial Sustainability of Earnings-Related Pension Schemes with 'Pay-as-You-Go' Financing and the Role of Government-Indexed Bonds

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dc.contributor.authorRobalino, David A.
dc.date.accessioned2012-03-30T07:30:14Z
dc.date.available2012-03-30T07:30:14Z
dc.date.issued2009
dc.description.abstractIn this paper we reconsider the idea of an earnings-related pension system with reserves invested in indexed government bonds as a mechanism to both ensure financial sustainability and improve security. The paper starts by reviewing the characterization of the sustainable rate of return of an earnings-related pension system with pay-as-you-go financing. We show that current proxies for the sustainable rate, including the Swedish 'gyroscope', are not stable and propose an alternative measure that depends on the growth of the buffer-stock and the pay-as-you-go asset. Using a simple one-sector macroeconomic model that embeds a notional account pension system we then show how GDP-indexed government bonds, if combined with the right measure for the sustainable rate of return on contributions, could be used to generate a sustainable and secure earnings-related pension system, without becoming a fiscal burden. The proposal is particularly attractive for countries considering reforms to earnings-related systems that have accumulated a large implicit pension debt. In this case, the government bonds allow the financing of this debt in a transparent way. The proposed mechanism can also facilitate the transition to a fully funded pension system when the government bonds are allowed to be traded.en
dc.identifier.citationJournal of Pension Economics and Finance
dc.identifier.issn14747472
dc.identifier.urihttps://hdl.handle.net/10986/4890
dc.language.isoEN
dc.relation.urihttp://creativecommons.org/licenses/by-nc-nd/3.0/igo
dc.rights.holderWorld Bank
dc.subjectPersonal Finance D140
dc.subjectSocial Security and Public Pensions H550
dc.subjectRetirement
dc.subjectRetirement Policies J260
dc.subjectNonwage Labor Costs and Benefits
dc.subjectPrivate Pensions J320
dc.titleOn the Financial Sustainability of Earnings-Related Pension Schemes with 'Pay-as-You-Go' Financing and the Role of Government-Indexed Bondsen
dc.title.alternativeJournal of Pension Economics and Financeen
dc.typeJournal Articleen
dc.typeArticle de journalfr
dc.typeArtículo de revistaes
dspace.entity.typePublication
okr.doctypeJournal Article
okr.externalcontentExternal Content
okr.identifier.externaldocumentum1483
okr.journal.nbpages153-187
okr.language.supporteden
okr.peerreviewAcademic Peer Review
okr.relation.associatedurlhttp://search.ebscohost.com/login.aspx?direct=true&db=eoh&AN=1044074&site=ehost-live
okr.relation.associatedurlhttp://www.pensions-journal.com/
okr.volume8
relation.isAuthorOfPublication63663214-e8c1-5318-a6f5-0c4de21dd09a
relation.isAuthorOfPublication.latestForDiscovery63663214-e8c1-5318-a6f5-0c4de21dd09a
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