Transcript POLISH PENSION FUNDS CHAMBER

POLISH PENSION FUNDS CHAMBER
PENSION REFORMS
IN CENTRAL & EASTERN EUROPE
1ST INTERNATIONAL
PENSION FUND CONFERENCE
MADRID, 13-14.04.2000
POLISH PENSION FUNDS CHAMBER
AGENDA:
1. DEMOGRAPHIC/ECONOMIC NECESSITY OF PENSION REFORM
IN THE REGION
2. MULTIPILLAR SYSTEM AS THE SOLUTION FOR CENTRAL AND
EASTERN EUROPE
3. FEATURES OF PENSION SCHEMES IN SELECTED COUNTRIES
4. ADVANTAGES AND RISKS OF FOUNDED SYSTEMS
POLISH PENSION FUNDS CHAMBER
GROWTH IN NUMBER OF PENSIONERS
1993 - 1996
160
140
Romania
Poland
Yugosl.
Slovenia
Albania
Latvia
Maced.
Hungary
Croatia
Slovakia
Ukraina
100
Bulgaria
120
Czech
Republic
IndexPre-1992=100
180
SOURCE: CENTRE FOR SOCIAL AND ECONOMIC RESEARCH (CASE)
POLISH PENSION FUNDS CHAMBER
DEPENDENCY RATIOS IN THE REGION
(PENSIONERS /CONTRIBUTORS)
MOST
RECENT
YEAR
120%
1992
80%
60%
40%
Croatia
Macedonia
Czech Republic
Yugoslavia
Slovakia
Slovenia
Romania
Poland
Latvia
Hungary
Ukraine
0%
Bulgaria
20%
Albania
Pensioners / Contributors
100%
SOURCE: CENTRE FOR SOCIAL AND ECONOMIC RESEARCH (CASE)
POLISH PENSION FUNDS CHAMBER
REPLACEMENT RATES IN THE REGION
(AVERAGE PENSIONS AS % OF GDP PER CAPITA)
60%
40%
Lithuania
Ukraine
Hungary
Romania
Albania
Czech
Republic
Bulgaria
Latvia
Slovakia
Croatia
Poland
0%
Slovenia
20%
SOURCE: CENTRE FOR SOCIAL AND ECONOMIC RESEARCH (CASE)
POLISH PENSION FUNDS CHAMBER
PUBLIC PENSION SPENDING IN CENTRAL AND EASTERN EUROPE,
1990-1995
(PER CENT OF GDP)
1990
1991
1992
1993
1994
1995
Bulgaria
8,7
9,1
9,9
10,9
9,8
8,1
Croatia
15,1
11,1
7,4
7,8
9,8
12,1
Czech
Republic
8,0
7,8
8,1
8,1
8,1
8,9
FYR
Macedonia
10,4
11,4
11,1
16,2
14,9
12,6
Hungary
9,7
10,5
11,0
11,1
11,5
10,4
Poland
8,6
12,6
14,6
14,9
16,0
15,4
Romania
7,9
6,6
6,5
6,4
6,7
7,0
Slovak
Republic
6,9
7,5
8,4
8,9
8,4
8,3
SOURCE: WORLD BANK
POLISH PENSION FUNDS CHAMBER
SOLUTION FOR THE REGION
- FUND SCHEMES INSTEAD PAYG - SYSTEM
1. PIONEERS : HUNGARY, POLAND - FUNDAMENTAL REFORMS HAS
BEEN LAUNCHED
2. CROATIA : AFTER THE LEGAL APPROVAL WAITING FOR START
3. OTHER COUNTRIES FOCUSED ON CHANGES IN FIRST AND THIRD
PILLAR
POLISH PENSION FUNDS CHAMBER
PENSION REFORMS IN THE CENTRAL AND EASTERN EUROPE
Country
Hungary
Poland
Croatia
Latvia
Romania
FYR Macedonia
Slovenia
Bulgaria
Czech Rep.
Slovakia
Ukraine
Lithuania
Estonia
Albania
Fundamental
Reform
Second pillar
First pillar
Third pillar
launched
launched
legislated
in preparation
approved
legislated
SOURCE: M. RUTKOWSKI - CENTRE FOR SOCIAL AND ECONOMIC RESEARCH (CASE), WORLD BANK
POLISH PENSION FUNDS CHAMBER
KEY ELEMENTS OF THE PENSION REFORM
Hungary
Poland
Croatia
Czech Republic
FIRST PILLAR
PAYG DB
NDC
PAYG DB
PAYG DB
SECOND PILLAR
EFFECTIVE
JANUARY 1998
APRIL 1999
JULY 2000
NO PLANS AT
PRESENT
THIRD PILLAR
EFFECTIVE
DECEMBER 1993
APRIL 1999
JULY 2000
1994
NEW ENTRANTS
UNDER 42
ALL THOSE UNDER 30
ALL THOSE UNDER 30
N/A
ANYONE IN WORK
ANYONE
BETWEEN 30 AND 50
ANYONE BETWEEN
30 AND 50
N/A
6% RISING OVER TIME
TO 8%
9% SUBJECT TO CAP
AT 250% OF NAE
N/A
MUTUAL FUND
PENSION FUND
MANAGED BY
SEPARATE
MANAGEMENT
COMPANY
PENSION FUND IS A
SPECIAL TYPE OF
JOINT STOCK CO W.
INTERNAL
RESERVES FOR
MEMBER ASSETS
NO RESTRICTIONS
NO RESTRICTIONS
NO RESTRICTIONS
NO MINIMUM
€ 4M FOR PILLAR II
MANAGEMENT CO
Kr20m
40 % OF ASSETS
NO LIMIT ON
MAXIMUM
5%
NONE
SECOND PILLAR
MANDATORY FOR …
SECOND PILLAR
VOLUNTARY
FOR …
CONTRIBUTION RATE
TO SECOND PILLAR
LEGAL STRUCTURE OF
FUNDS AND
MANAGEMENT
COMPANIES
FOREIGN OWNERSHIP
OF FUNDS AND
MANAGEMENT
COMPANIES
MINIMUM CAPITAL
REQUIREMENT
PERMITTED EQUITY
INVESTMENT
PERMITTED FOREIGN
INVESTMENT
NO LIMIT ON
MAXIMUM
10% RISING TO 30 % IN
PILLAR II, 20 % IN
PILLAR III
POLISH PENSION FUNDS CHAMBER
ADVANTAGES / RISKS OF FOUNDED SYSTEMS
ADVANTAGES
 RELIEF FOR GOVERNMENT
BUDGET
RISKS
 INVESTMENT RESTRICTIONS
REDUCE PENSIONS
 GROWTH OF PROPENSITY TO SAVE  LIQUIDITY PROBLEM ON THE LESS
– DEVELOPED CAPITAL MARKETS
 REINFORCEMENT OF CAPITAL
MARKETS
 INCREASE OF ADMINISTRATION
COSTS IN THE LONG RUN
 FLEXIBILITY
 PENSION DEPENDS ON MARKET
CONDITIONS
 SECURITY THROUGH DIVERSITY
 UNDERPERFORMANCE VERSUS
VOLATILITY