Transcript Presentation

Equity Analysis for Pensions
(Social Insurance)
Presented to:
Public Expenditure
Analysis and Manage
Core Course
The World Bank
March 21-24, 2005
Presented by:
Anita M. Schwarz
ECSHD
Equity Analysis for
Pensions (Social Insurance)
Anita M. Schwarz
ECSHD
March 2005
Pensions Based on
Contributions
Coverage limited to those who pay; benefits
based on level and duration of contributions
 Less than 50% of the labor force is paying
contributions – likelihood of paying goes up
with income
 Unsurprisingly, expenditures go to higher
income groups

Important Redistributions
Nonetheless
Redistribution from those outside the
system to those within when there are fiscal
deficits
 Redistribution across generations – younger
cohorts pay more with aging of the
population
 Redistribution within covered cohort

– Progressive benefit formula
– Minimum pension
Fiscal Sustainability
Deficit as % of GDP
Deficits in Turkish Pension Systems
(2.0%20)0
4
11 018 025
0
2
2
2
32 039
0
2
2
46 053
0
2
2
(4.0% )
60 067
0
2
2
74
0
2
Base Case
(6.0% )
(8.0% )
Years
Fiscal Sustainability
 Someone
has to pay the future
pensioners
– Either paid from outside the system
– Partial default due to rules change
 Redistribution
from outside the system
to within
 Intergenerational equity
Equity within a Cohort
Women's Pensions Relative to Pre-Retirement Wage
Internal Rates of Return for Different Women
% rate of interest
7
6
5
High income
4
Average Income
3
Low income
2
1
0
Pre-Reform PAYGfemale
Female
Current
Female
FutureFemale
90
80
70
60
50
40
30
20
10
0
High Income
Avg Income
Low Income
Pre-Reform
Female
PAYGfemale Current Female FutureFemale
Sometimes Need to Look
Beyond Pension System for
Intracohort Equity
 Sometimes
means-tested pension
benefits available in addition to
contributory
 Sometimes basic benefits available to
all
 Sometime pensioners eligible for same
social assistance as other age groups