Structural Settings, Political Actors and Paradigmatic Outcomes in Central-Eastern European Pension Reforms

Abstract

Ageing populations and public pension schemes that are in financial trouble, as well as a novel wave of pension reforms in Latin America, have triggered off renewed debate about the need to reform old-age security schemes in many parts of the world. Is it sufficient to adapt technical parameters - such as coverage, eligibility, benefit formulas and retirement age -, while basically maintaining a public pay-as-you-go (PAYG) system? Or is a private, fully funded (FF) pension scheme, such as the one introduced in Chile² in 1981, a more appropriate solution to short-and long-term problems?

Article Footnote

This paper presents preliminary results of a research project entitled “Institutional Change in Social Security: Pension Systems in Poland, Hungary, and the Czech Republic”. Funding by Deutsche Forschungsgemeinschaft (DFG) is gratefully acknowledged. The author would like to thank numerous Polish, Hungarian and Czech social security experts for sharing background information and ideas on the Central-Eastern European pension reforms. She is particularly indebted to Mária Augusztinovics, Frank Bönker, Zofia Czepulis-Rutkowska, Róbert I. Gál, Katja Hujo, Rubén Lo Vuolo, Klaus Müller, Joan Nelson, Andreas Ryll, Helmut Schwarzer and András Simonovits for helpful comments on earlier versions of this paper.

Under the military dictatorship of General Pinochet, Chile has been the first country in the world to switch from a public PAYG system to a multipillar scheme based on private, FF pension funds - the so-called AFPs (Administradoras de Fondos de Pensiones). The impact of the so-called “Chilean Model” reaches far beyond Latin America. See Mesa-Lago and Arenas de Mesa (1997) and Müller (1997) for a critical review of the Chilean pension reform.