Publication: Modeling Pension Reform : The World Bank's Pension Reform Options Simulation Toolkit
Loading...
Date
2010-11
ISSN
Published
2010-11
Author(s)
Editor(s)
Abstract
Today's pension policies can affect retirement incomes and the public finances for decades to come. Retirement income systems that are affordable today, will often prove unsustainable in the future, given the twin pressures of demographic aging and the maturing of pension schemes. The World Bank's pension reform options simulation toolkit (PROST) models pension contributions, entitlements, system revenues, and system expenditures over a long time frame. The model is designed to promote informed policymaking, bridging the gap between quantitative and qualitative analysis of pension regimes. It is a flexible, computer-based toolkit, easily adapted to wide range of countries' circumstances.
Link to Data Set
Citation
“World Bank. 2010. Modeling Pension Reform : The World Bank's Pension Reform Options Simulation Toolkit. World Bank Pension Reform Primer Series, World Bank PROST Model. © World Bank. http://hdl.handle.net/10986/11074 License: CC BY 3.0 IGO.”
Associated URLs
Associated content
Other publications in this report series
Journal
Journal Volume
Journal Issue
Collections
Related items
Showing items related by metadata.
Publication Kyrgyz Republic Public Expenditure Review Policy Notes : Pensions(Washington, DC, 2014-05)Today, the Kyrgyz pension system plays a major role in poverty alleviation of the elderly but this role is diminishing fast due to low coverage of working age population. The system currently provides pensions to more than 90 percent of the population over age 65 thus being a significant buffer against poverty. Over time, though, the poverty reduction effect of the pension system is expected to weaken substantially as the current low coverage rates among the working age population translate into much lower coverage rates of about only 60 percent for the future old age population. As a result, poverty rates among the old-age population will grow and government spending on social pensions will increase dramatically. The structure of this chapter is as follows. The next section provides an overview of the current pension system and the main issues facing it. Section three presents the results of the financial projections for the current system assuming a no-reform scenario and the implications of doing nothing on the finances of the Social Fund, the cost to the government and the expected benefits (baseline projections). Section four considers several broad reform options and their impact with respect to the financial sustainability and affordability of the system as well as adequacy of benefits. Section five outlines the issues remaining beyond the scope of this study which require further analysis. Annex one summarizes the main parameters of the current pension system and annexes two provides a brief description of the main assumptions used in the projections and the projection methodology. The diagnosis of the current system and the evaluation of the reform options presented in this chapter are based on the simulations produced with the World Bank Pension Reform Options Simulation Toolkit (PROST) model.Publication Adequacy of Retirement Income after Pension Reforms in Central, Eastern, and Southern Europe : Eight Country Studies(World Bank, 2009)All of the former transition economies in Central, Eastern, and Southern Europe (CESE) inherited from the era of central planning traditional defined-benefit pension systems financed on a pay-as-you-go basis. Like many pay-as-you-go public pension systems elsewhere in the world, CESE pension systems were in need of reforms to address short-term fiscal imbalances and longer-term issues relating to population aging. Reforms were also needed to adjust benefit and contribution structures to meet the challenges of-as well as to take advantage of opportunities relating to the transition to a market economy, including the widespread adoption of multiplier designs with improved risk-sharing across funded and unfunded pillars. By 2006, most countries in Europe and Central Asia had introduced a voluntary private pension scheme. By 2008, 14 countries roughly half of all countries in the region had legislated mandatory private pension schemes, and all but one of those schemes (the one in Ukraine) had been introduced. These reforms shared a number of common objectives, in particular putting the systems on a sounder financial footing and better aligning them with the (very different) incentives of a market economy. This report is organized as follows. The first section discusses the motivation for reform across the eight countries included in the study against the backdrop of the regional (and global) trend toward multiplier pension arrangements. The second section summarizes the key provisions of the reformed systems in the eight countries within the World Bank's five-pillar framework for pension system design. The third section summarizes pension system performance against the two crucially important dimensions of adequacy and sustainability. The last section provides some policy recommendations for addressing gaps in reforms and taking advantage of further opportunities.Publication Demographic Alternatives for Aging Industrial Countries : Increased Total Fertility Rate, Labor Force Participation, or Immigration(World Bank, Washington, DC, 2005-12)The paper investigates the demographic alternatives for dealing with the projected population aging and low or negative growth of the population and labor force in the North. Without further immigration, the total labor force in Europe and Russia, the high-income countries of East Asia and the Pacific, China, and, to a lesser extent, North America is projected to be reduced by 29 million by 2025 and by 244 million by 2050. In contrast, the labor force in the South is projected to add some 1.55 billion, predominantly in South and Central Asia and in Sub-Saharan Africa. The demographic policy scenarios to deal with the projected shrinking of the labor forth in the North include moving the total fertility rate back to replacement levels, increasing labor force participation of the existing population through a variety of measures, and filling the demographic gaps through enhanced immigration. The estimations indicate that each of these policy scenarios may partially or even fully compensate for the projected labor force gap by 2050. But a review of the policy measures to make these demographic scenarios happen also suggests that governments may not be able to initiate or accommodate the required change.Publication Mongolia Policy Options for Pension Reform(Washington, DC, 2011-01-20)This report was prepared in response to a request by the Mongolian authorities for an evaluation of the Mongolian pension system and policy reform options. The report identifies a number of design weaknesses in the current pension insurance scheme and needs for reform in response to changes in the Mongolian economy. The summary of this report provides a brief synopsis for key policymakers of the rationale for reform and policy options considered. The main text responds to requests by the Mongolian authorities for the Bank's assessment. It considers the design architecture and parameters of the pension insurance scheme, the design of non- contributory elderly social assistance, pension provisions for herders and the rationale and design options for a pension reserve fund. The appendices provide more detailed analysis for technical staff including current pension insurance parameters; needs and policy options for herders and other informal sector workers; options for establishing a pension reserve fund; and elaboration of the actuarial modeling methodology employed, key assumptions and parameters, and detailed findings. Mongolia's economy, labor market and fiscal position are undergoing rapid changes as a result of growth in the mining sector. These changes present both challenges and opportunities for reform in pension provisions.Publication Creation of a Reformed Pension System for Civil Servants in Timor-Leste(Washington, DC, 2014-02)In February 2011, the government of Timor-Leste (GoTL) enacted a law creating a pension system for civil servants. However, the government now wants to repeal and replace this pension law as it deems it too broad in scope, coverage and cost, and it contains several non-standard design features. In its place, the GoTL wants to consider creating a reformed permanent civil service pension program covering all civil servants. Within a few years thereafter, the government also wants to implement a national social security system. This system will cover formal sector workers, and it is likely civil servants will also participate. Consequently, civil servants may get benefits from both the national social security system and the civil service pension system. Timor-Leste has many civil servants with long service both before and after independence. The reformed pension system for civil servants will give the government a method of honorably allowing its elderly civil servants to exit the work force. At this time, the primary method of caring for elderly civil servants is to continue salary payments. This is because there is no mandatory retirement age for civil servants and the government does not yet have effective procedures for compelling older workers to retire when their productivity level declines. Consequently, the government has informed us that the civil service pension is unlikely to pay benefits to any civil servants until such time as these two issues are resolved. The government estimates this will take five years (until 2018). Until that time, elderly civil servants will continue to receive their salary and will not receive a pension from the reformed civil service pension program.
Users also downloaded
Showing related downloaded files
Publication Unlocking the Power of Healthy Longevity(Washington, DC: World Bank, 2024-09-12)The World Bank has a long history of engaging in population issues, ranging from childhood illness, nutrition, fertility, and safe motherhood to the aging process. It supports countries in addressing the implications of the demographic process through analytical work, technical advice, and financing to expand health coverage, redesign pension systems and social security, and undertake actions that support their economies. This report follows that tradition and analyzes the steps to promote healthy longevity and enhance the quantity and quality of human capital through attention to the burgeoning problem of Non-communicable diseases (NCDs). Research began before COVID and concluded after, drawing upon lessons from the pandemic. The report is intended to inform policy and action at the country level. The demographic transformation is a global phenomenon, and the increasing population of the middle-aged and elderly brings with it many challenges which are more acute in low- and middle-income countries where resources are more limited. The increasing number of adults calls upon countries to institute the social and economic measures of ensuring their wellbeing and making them optimally productive. Health must be at the center of these concerns, not only its preservation towards the end but its optimization throughout the life-course. This report builds on a compendium of analytical papers covering the economics of avoidable mortality, long-term care, behavior change, social protection, and whole-of-government solutions to support healthy longevity. It emphasizes that a great deal of ill health globally is a result of inequities—especially poverty and gender inequities that limit or delay access to and use of health care. High out-of-pocket payments for NCDs can plunge households further into poverty or extreme poverty. Women live longer with NCD morbidities.Publication Global Economic Prospects, January 2025(Washington, DC: World Bank, 2025-01-16)Global growth is expected to hold steady at 2.7 percent in 2025-26. However, the global economy appears to be settling at a low growth rate that will be insufficient to foster sustained economic development—with the possibility of further headwinds from heightened policy uncertainty and adverse trade policy shifts, geopolitical tensions, persistent inflation, and climate-related natural disasters. Against this backdrop, emerging market and developing economies are set to enter the second quarter of the twenty-first century with per capita incomes on a trajectory that implies substantially slower catch-up toward advanced-economy living standards than they previously experienced. Without course corrections, most low-income countries are unlikely to graduate to middle-income status by the middle of the century. Policy action at both global and national levels is needed to foster a more favorable external environment, enhance macroeconomic stability, reduce structural constraints, address the effects of climate change, and thus accelerate long-term growth and development.Publication World Development Report 2024(Washington, DC: World Bank, 2024-08-01)Middle-income countries are in a race against time. Many of them have done well since the 1990s to escape low-income levels and eradicate extreme poverty, leading to the perception that the last three decades have been great for development. But the ambition of the more than 100 economies with incomes per capita between US$1,100 and US$14,000 is to reach high-income status within the next generation. When assessed against this goal, their record is discouraging. Since the 1970s, income per capita in the median middle-income country has stagnated at less than a tenth of the US level. With aging populations, growing protectionism, and escalating pressures to speed up the energy transition, today’s middle-income economies face ever more daunting odds. To become advanced economies despite the growing headwinds, they will have to make miracles. Drawing on the development experience and advances in economic analysis since the 1950s, World Development Report 2024 identifies pathways for developing economies to avoid the “middle-income trap.” It points to the need for not one but two transitions for those at the middle-income level: the first from investment to infusion and the second from infusion to innovation. Governments in lower-middle-income countries must drop the habit of repeating the same investment-driven strategies and work instead to infuse modern technologies and successful business processes from around the world into their economies. This requires reshaping large swaths of those economies into globally competitive suppliers of goods and services. Upper-middle-income countries that have mastered infusion can accelerate the shift to innovation—not just borrowing ideas from the global frontiers of technology but also beginning to push the frontiers outward. This requires restructuring enterprise, work, and energy use once again, with an even greater emphasis on economic freedom, social mobility, and political contestability. Neither transition is automatic. The handful of economies that made speedy transitions from middle- to high-income status have encouraged enterprise by disciplining powerful incumbents, developed talent by rewarding merit, and capitalized on crises to alter policies and institutions that no longer suit the purposes they were once designed to serve. Today’s middle-income countries will have to do the same.Publication Global Economic Prospects, June 2024(Washington, DC: World Bank, 2024-06-11)After several years of negative shocks, global growth is expected to hold steady in 2024 and then edge up in the next couple of years, in part aided by cautious monetary policy easing as inflation gradually declines. However, economic prospects are envisaged to remain tepid, especially in the most vulnerable countries. Risks to the outlook, while more balanced, are still tilted to the downside, including the possibility of escalating geopolitical tensions, further trade fragmentation, and higher-for-longer interest rates. Natural disasters related to climate change could also hinder activity. Subdued growth prospects across many emerging market and developing economies and continued risks underscore the need for decisive policy action at the global and national levels. Global Economic Prospects is a World Bank Group Flagship Report that examines global economic developments and prospects, with a special focus on emerging market and developing economies, on a semiannual basis (in January and June). Each edition includes analytical pieces on topical policy challenges faced by these economies.Publication Business Ready 2024(Washington, DC: World Bank, 2024-10-03)Business Ready (B-READY) is a new World Bank Group corporate flagship report that evaluates the business and investment climate worldwide. It replaces and improves upon the Doing Business project. B-READY provides a comprehensive data set and description of the factors that strengthen the private sector, not only by advancing the interests of individual firms but also by elevating the interests of workers, consumers, potential new enterprises, and the natural environment. This 2024 report introduces a new analytical framework that benchmarks economies based on three pillars: Regulatory Framework, Public Services, and Operational Efficiency. The analysis centers on 10 topics essential for private sector development that correspond to various stages of the life cycle of a firm. The report also offers insights into three cross-cutting themes that are relevant for modern economies: digital adoption, environmental sustainability, and gender. B-READY draws on a robust data collection process that includes specially tailored expert questionnaires and firm-level surveys. The 2024 report, which covers 50 economies, serves as the first in a series that will expand in geographical coverage and refine its methodology over time, supporting reform advocacy, policy guidance, and further analysis and research.