Pension Reform and the Development of Pension Systems An Evaluation of World Bank Assistance
Pension reform is a focus of World Bank activities because pensions are an important part of the social safety net for workers covered by the formal pension system in many client countries. Pensions are a mechanism to reduce the risks of old-age poverty and a means to smooth lifetime income to maintain living standards in retirement.
Pension systems must be fiscally and politically sustainable to achieve their income-support objective. Unsustainable pension systems can be an obstacle to fiscal stability, economic growth, and poverty reduction. Over the past two decades, the need for pension reform has become more pressing in client countries, because demographic aging and the mismanagement of pension systems have put a strain on government budgets, which threatens to undermine macroeconomic stability and retirement income security. Countries with high coverage rates and increasingly high percentages of the population reaching retirement age are most likely to face severe future fiscal imbalances. Countries in the Bank’s Europe and Central Asia Region are prime examples. Even countries with lower coverage and younger populations, including countries in the Latin America and Caribbean Region, face fiscal issues similar to those in countries with serious demographic problems, particularly when employment in the covered sector is declining relative to an increasing number of retirees. In countries in other Regions, pension reform has been less of a priority.
This report is the first comprehensive, independent evaluation of the Bank’s involvement in pension reform. It assesses the Bank’s pension reform strategy and the resulting development outcomes for Bank assistance between 1984 and 2004. During this period, the Bank assisted 68 countries with reform of their pension systems with more than 200 loans and credits. In addition, the Bank issued more than 350 papers and publications on pension reform.