Rethinking Public Pension Reform Initiatives

by Peter S. Heller

Much attention has been given in recent years to the potential benefits of governments adopting mandatory defined-contribution, fully-funded-schemes (DC/FF) managed by the private sector. Such schemes may be new or may involve a transformation of an existing traditional government-managed defined benefit (DB) pay-as-you-go (PAYGO) approach. Both the World Bank and Asian Development Bank (ADB) have touted the merits of such schemes.2 Higher average returns on savings for retirement, possibly increased national saving rates, less microeconomic distortions, greater transparency, and much reduced political risks have been the principal advantages cited (see section II). Although Chile's policies are the most often cited, the high savings rate achieved by some Asian economies that have adopted provident fund schemes (notably Singapore and Malaysia) has been used to further buttress support for such pension reform initiatives.

31 pages, Kindle Edition

First published April 1, 1998