Building Voluntary Pension Schemes in Emerging Economies
By Rodolph Heinz
After the financial crisis, some Central and Eastern Europe countries partially or totally reversed the pension reforms they had initiated in the previous two decades. In the presence of an aging population in the region, reductions in replacement rates will be the most likely adjustment mechanism for the social security systems to remain fiscally sustainable. In some other emerging economies, mandatory funded schemes are operating with low contribution rates, and policy makers have not been able to pass legislation to increase the contribution rate to ensure adequate pensions for future retirees. Voluntary pension schemes that take into consideration the behavioral aspects of individuals may provide a viable solution for countries that need to increase retirement savings but face political resistance to mandatory increases in contribution rates. The proposed mechanism shifts the focus of voluntary pension plans from “opt-in” to “opt-out” schemes.
Full Content: The World Bank
