1. The World Bank Pension Reform Perspectives in Europe Hermann von Gersdorff Sector Manager Social Protection World Bank FIAP June 1, 2007 Varna, Bulgaria

2. The World Bank 2 Enhancing Job Opportunities in ECA 2 Reform initiation and progress of countries is weakly linked to reform needs Perfect designed scheme neither necessary nor sufficient for successful reform and implementation –stays on the shelf –gets discussed but does not receive support –gets implemented but is politically not sustainable Political economy of reforms crucial for success, but have limited understanding –Arrogance of economists? Yes, perhaps –Limited reform experience? No, not anymore First Considerations ….

3. The World Bank 3 Enhancing Job Opportunities in ECA 3 Elements of reform trigger experience: –Regional diffusion process: Keeping-up with the neighbor(s) –Credible paradigm change or reform fantasy? –Information and communication matter …. Elements of reform completion experience: –Pension reform must be part and parcel of comprehensive reform program –Long-term commitment by government(s) essential –Luck – no external and/or internal shocks …. Second Considerations …

4. The World Bank 4 Enhancing Job Opportunities in ECA 4 Third Considerations … Suggested Key Elements of Success Quality technical content of the concept Translated into policies ….translated into programs ….translated into practices

5. The World Bank 5 Enhancing Job Opportunities in ECA 5 Triggers for Reform Valid: Dependency Ratios 2000-2050

6. The World Bank 6 Enhancing Job Opportunities in ECA 6 A Proposed Framework COMMITMENT-BUILDING COALITION-BUILDING IMPLEMENTATION

7. The World Bank 7 Enhancing Job Opportunities in ECA 7 COUNTRIES EMBARKING ON NEW SYSTEMIC PENSION REFORM –Romania: since 1996, actually passed and derogated pension reform law, expected to launch in 2008. –Armenia: Design and Commitment Building Phase, but in a rush –Serbia: lost reform champion, likely to stay introduce only voluntary pensions –Albania: Commitment at Central Government –Kyrgyz R., did NDC and still pursuing reform –Ukraine: legislated framework in 1998 and expected to launch 2008. Without plans for Systemic Reform: Belarus, Czech R., Moldova, Slovenia

8. The World Bank 8 Enhancing Job Opportunities in ECA 8 Some Unsolved Problems: Female Pensions

9. The World Bank 9 Enhancing Job Opportunities in ECA 9 Some Unresolved Problems: Coverage

10. The World Bank 10 Enhancing Job Opportunities in ECA 10 Status of Reformed Pension Schemes Bulgaria (2002): achieved to increase contribution to funded pension system. Issues, level of existing pensions and number of disability pensions. Poland (1999): big challenge in benefits payout system. Hungary (1998): has overcome large challenges, issue of fiscal deficit Croatia (2002): slow erosion through PAYGO reform reversals

11. The World Bank 11 Enhancing Job Opportunities in ECA 11 Status of Reformed Pension Schemes: Replacement Rate

12. The World Bank 12 Enhancing Job Opportunities in ECA 12 Status of Reformed Pension Schemes Slovakia (2005): Issues, level of recalculated pensions and large number of participants (Euro/Eurostat). Russia (2002): late launch led to non- supportive Government, at risk. Macedonia (2005): been solving pre- condition challenges successfully Kazakhstan (1998): level of benefits and return on funds

13. The World Bank 13 Enhancing Job Opportunities in ECA 13 Status of Reformers: Rate of Return

14. The World Bank 14 Enhancing Job Opportunities in ECA 14 References Holzmann, R., Richard Hinz, and Bank Team, 2005. Old-Age Income Support in the Twenty-first Century: An International Perspective on Pension Systems and Reform, Washington, DC: World Bank. Chapter 6. Holzmann, Robert, Michael Orenstein, and Michal Rutkowski, eds. 2003. Pension Reform in Europe: Progress and Process. Washington, DC: World Bank. Orenstein, Mitchell. 2000. “How Politics and Institutions Affect Pension Reform in Three Postcommunist Countries.” Policy Research Working Paper 2310, Development Research Group, Macroeconomics and Growth, World Bank, Washington, DC.