Reforming Pensions in Developing and Transition Countries: Conclusions

Abstract

Pension systems are one of the most dynamic areas of social policy reform, both in terms of the number and frequency of reforms implemented and with regard to the attention they receive in academic and policy debates. Pension reform projects can help to win elections (as happened in Chile 2006 and Peru 2011), and they can lead to violent protests on the streets (as seen recently in France and Greece).¹ Pensions are considered to be one of the most important government programmes, with impacts reaching beyond social security; when in deficit, pensions are blamed for driving states into bankruptcy; on the other hand, they are often expected to act as a panacea for multiple development goals such as poverty reduction, financial market development and growth (World Bank 1994; James 1997). There are also debates about what type of social expenditures countries should prioritize. It is sometimes argued that, rather than paying pensions, poor countries should invest public funds in younger generations, for example through health and education spending since these foster human capital, which is growth-enhancing.² Finally, as the Introduction (Chapter 1) has outlined, controversial debates revolve around the specific design of old-age protection systems, the roles of states versus markets, the balance between tax-financed and contribution-financed programmes, and the conflicting challenges of efficiency versus equity.