On the Financial Sustainability of Earnings-Related Pension Schemes with “Pay-As-You-Go” Financing and the Role of Government Indexed Bonds

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dc.creatorBodor, András
dc.creatorRobalino, David A.
dc.date2012-06-18T22:32:33Z
dc.date2012-06-18T22:32:33Z
dc.date2006-07
dc.date.accessioned2026-07-01T01:30:42Z
dc.descriptionIn this paper the authors reconsider the idea of an earnings-related pension system with reserves invested in indexed government bonds as a mechanism to both ensure financial sustainability and improve security. They start by reviewing the characterization of the sustainable rate of return of an earnings-related pension system with pay-as-you-go financing. The authors show that current proxies for the sustainable rate, including the Swedish "gyroscope," are not stable and propose an alternative measure that depends on the growth of the buffer-stock and the pay-as-you-go asset. Using a simple one-sector macroeconomic model that embeds a notional account pension system they then show how GDP indexed government bonds, if combined with the right measure for the sustainable rate of return on contributions, could be used to generate a sustainable and secure earnings-related pension system, without becoming a fiscal burden. The proposal is particularly attractive for countries considering reforms to earnings-related systems that have accumulated a large implicit pension debt. In this case, the government bonds allow the financing of this debt in a transparent way. The proposed mechanism can also facilitate the transition to a fully-funded pension system when the government bonds are allowed to be traded.
dc.formatapplication/pdf
dc.formattext/plain
dc.identifierhttp://documents.worldbank.org/curated/en/2006/07/6918300/financial-sustainability-earnings-related-pension-schemes-pay-as-you-go-financing-role-government-indexed-bonds
dc.identifierhttps://hdl.handle.net/10986/8387
dc.identifierhttps://doi.org/10.1596/1813-9450-3966
dc.identifier.urihttp://hdl.handle.net/123456789/418764
dc.languageEnglish
dc.publisherWorld Bank, Washington, DC
dc.relationPolicy Research Working Paper; No. 3966
dc.rightsCC BY 3.0 IGO
dc.rightshttp://creativecommons.org/licenses/by/3.0/igo/
dc.rightsWorld Bank
dc.subjectACCOUNTING FRAMEWORK
dc.subjectAGE DISTRIBUTION
dc.subjectANNUITIES
dc.subjectANNUITY
dc.subjectANNUITY FACTOR
dc.subjectASSETS
dc.subjectAVERAGE WAGE GROWTH
dc.subjectBANKRUPTCY
dc.subjectBASIC
dc.subjectBENEFIT FORMULA
dc.subjectBONDS
dc.subjectCASH BALANCE
dc.subjectCOMPUTING
dc.subjectCONTRIBUTION BASE
dc.subjectCONTRIBUTION RATE
dc.subjectCONTRIBUTION RATES
dc.subjectDEBT
dc.subjectDEMOGRAPHIC TRENDS
dc.subjectDISCOUNT RATE
dc.subjectDROPOUT
dc.subjectECONOMIC GROWTH
dc.subjectFERTILITY
dc.subjectFERTILITY RATES
dc.subjectGDP
dc.subjectGDP PER CAPITA
dc.subjectGOVERNMENT BONDS
dc.subjectGROWTH RATE
dc.subjectGROWTH RATES
dc.subjectHUMAN CAPITAL
dc.subjectINDEXATION
dc.subjectINDEXED BONDS
dc.subjectINDEXING
dc.subjectINDIVIDUAL ACCOUNTS
dc.subjectINFLATION
dc.subjectINTEREST RATE
dc.subjectINTEREST RATES
dc.subjectLABOR FORCE
dc.subjectLABOR SUPPLY
dc.subjectLEVEL OF CAPITAL
dc.subjectLIFE EXPECTANCY
dc.subjectLOW-INCOME COUNTRIES
dc.subjectMACROECONOMIC MODEL
dc.subjectMARGINAL PRODUCTIVITY
dc.subjectMORTALITY
dc.subjectNOTIONAL ACCOUNT
dc.subjectNOTIONAL ACCOUNT SCHEMES
dc.subjectNOTIONAL ACCOUNT SYSTEMS
dc.subjectNOTIONAL CAPITAL
dc.subjectOLE
dc.subjectOPPORTUNITY COST
dc.subjectPENSION FUND
dc.subjectPENSION LIABILITIES
dc.subjectPENSION PLAN
dc.subjectPENSION REFORM
dc.subjectPENSION RIGHTS
dc.subjectPENSION SCHEMES
dc.subjectPENSION SYSTEM
dc.subjectPENSION SYSTEM PARAMETERS
dc.subjectPENSION SYSTEMS
dc.subjectPENSIONS
dc.subjectPOLICY IMPLICATIONS
dc.subjectPOLICY MAKERS
dc.subjectPOLICY RESEARCH
dc.subjectPOLICY RESEARCH WORKING PAPER
dc.subjectPOPULATION GROWTH
dc.subjectPOPULATION GROWTH RATE
dc.subjectPOPULATION GROWTH RATES
dc.subjectPRICE INDEXATION
dc.subjectPRODUCTION FUNCTION
dc.subjectPRODUCTIVITY
dc.subjectPRODUCTIVITY INCREASES
dc.subjectPRODUCTIVITY OF CAPITAL
dc.subjectPROGRAMMING
dc.subjectPROGRESS
dc.subjectPROPERTY RIGHTS
dc.subjectRATE OF RETURN
dc.subjectREAL GDP
dc.subjectRESPECT
dc.subjectRETIREES
dc.subjectRETIREMENT
dc.subjectRETIREMENT AGE
dc.subjectSEX
dc.subjectSIMULATION
dc.subjectSYSTEM DESIGN
dc.subjectWAGES
dc.titleOn the Financial Sustainability of Earnings-Related Pension Schemes with “Pay-As-You-Go” Financing and the Role of Government Indexed Bonds

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