Publication: Early Access to Pension Savings: International Experience and Lessons Learnt
Date
2019-03-01
ISSN
Published
2019-03-01
Author(s)
World Bank Group
Abstract
The objectives of a well-designed
pension system are poverty reduction in old age and income
smoothing throughout an individuals' lifetime. Over the
last thirty years, changing demographic trends have caused a
shift from 'pay as you go' and occupational
defined benefit (DB) schemes - where the obligation for
paying for retirement income is with the state and employers
- to defined contribution (DC) schemes, where the obligation
to save for retirement rests more with individuals. The
transition to DC schemes did help establish a strong link
between contributions during working life and benefits
during retirement, for individuals. However, an increasing
challenge has been balancing genuine needs for some
pre-retirement liquidity, access to savings and providing
adequate income post retirement for individuals. The need to
get this balancing act right is being felt increasingly as
coverage of national social security systems is expanded to
include more of the non-salaried workforce which often has
lower levels of income, more periods of unemployment and
more irregular earnings. This note surveys recent literature
and country experiences to understand if and how countries
address the need for pre-retirement liquidity in both
mandatory and voluntary DC schemes. The note also uses
simple modelling to illustrate the impact of allowing access
to pension savings on income adequacy after retirement. The
report concludes with recommendations based on emerging best practice.
Citation
“World Bank Group. 2019. Early Access to Pension Savings: International Experience and Lessons Learnt. Finance, Competitiveness and Innovation Insight;. © World Bank, Washington, DC. http://hdl.handle.net/10986/31356 License: CC BY 3.0 IGO.”