From Austerity to Austerity: The Political Economy of Public Pension Reforms in Romania and Bulgaria

This article discusses the trajectories of pension system reforms in two of the latecomers to the EU: Bulgaria and Romania. It finds that over the past two decades, the two countries pursued increasingly dissimilar public pension reforms for managing their respective public pay‐as‐you‐go pension systems. Using a political institutionalist theoretical framework, I argue that the divergence between the two cases is attributable to multiple factors. First, different temporary political compromises between national and international actors generated reforms that retrenched public pensions and introduced mandatory private accounts. Second, pension reforms often had unintended consequences that limited their intended impact. Third, incremental adjustments introduced by governments in response to political pressures caused alternating phases of austerity and generosity that catered to different constituencies in each country. In Romania, reform outcomes amounted to a moderately generous pension system, financed through relatively high contribution rates with a small funded component, while in the case of Bulgaria, the pension system evolved into a meagre programme, financed through low contribution rates and a larger private pillar.     

The gender impact of National Pension reforms in the Republic of Korea

This article examines the gender impact of National Pension reforms in the Republic of Korea. In 2007, the Korean government introduced an income-tested basic old-age pension scheme paying flat-rate benefits. It also introduced credited pension coverage periods for child rearing and changed entitlement conditions for divorcees and widows and widowers. This paper examines the impact of these policy changes for individuals with shorter working lives and lower wages, for survivors and for the traditional social protection role played by the family in Korea. Findings indicate that the reforms have some positive features. However, the reforms still offer better value for those with higher earnings and an uninterrupted employment history, both of which are more characteristic of male workers. Moreover, the important income security role played by the family is still strongly embedded in the provisions and the protection available to survivors remains weak.     

The Impact of Neo-liberalism on South Korea's Public Pension: A Political Economy of Pension Reform

This article examines the recent Korean pension reforms from a political economy perspective. It argues that these reforms are of particular interest because, unlike major pay-as-you-go pension schemes in Europe, the Korean pension scheme is a funded one and, therefore, is subject to market exposure. Also in contrast to the problems that public pension reforms have encountered in European and other OECD countries, especially 'blame avoidance', the more radical Korean reforms were implemented without significant challenge or resistance. First of all, the National Pension Scheme is described prior to the 1997 Asian economic crisis. Then the impact of this crisis on the Korean welfare state and, especially, its pension system are analysed. The main part of the article consists of a political economy of the pension reform process, in which the key roles of the international governmental organizations and the domestic neo-liberal policy elite are pinpointed. This neo-liberal ideology was critical in developing and sustaining an influential discourse on the 'crisis' in Korea's national pension fund. The article concludes by arguing, against the neo-liberal tide, for the inclusion of a pay-as-you-go element in the national pension in order to tackle escalating poverty in old age.     

Convergence or divergence? How the financial crisis affected European pensioners

The Member States of the European Union entered the financial crisis with very different pension systems. Although the use of standard adequacy measures suggest small impacts from the crisis, alternative measures based on pension wealth estimates indicate stronger effects. While the largest continental systems were left relatively unscathed by the crisis, Mediterranean systems were cut back significantly. This should lead to considerable convergence in system generosity across countries. Despite the cuts, state pensions in the stressed economies should still be generous enough to keep the majority of pensioners out of relative poverty, but this depends on a relatively quick turnaround in labour market performance in these countries.     

Chile and beyond: The second-generation pension reforms in Latin America

In the early 1990s, pension reforms leading to substantial changes in the organization and financing of old age security were undertaken in Argentina, Colombia and Peru. Implemented ten years after the pioneer reforms in Chile, they have taken advantage of the experiences and lessons of the Chilean case; at the same time, the second-generation reforms clearly demonstrate the restrictions policy makers are being faced with in a democratic political context. This paper examines the recent pension reform experiences in Latin America and discusses their implications for a modified concept of old age security.     

Working life and retirement pensions in Spain: The simulated impact of a parametric reform

This article aims to offer an ex ante evaluation of the impact of a parametric reform of the Spanish pension system that would involve increasing the reference period used to calculate benefits, an approach proposed many times by various actors in the socio‐economic field. Such gradual change may be categorized as a non‐structural reform of the pension system. This contrasts with reforms of a structural nature that have been very popular in Latin America and elsewhere, involving the creation of defined contribution individual account schemes. As regards the parametric reform proposed in this article, the main findings indicate that it would have a small but negative impact on pension income for pensioners and would reduce income distribution.     

Can complementary pension plans help improve retirement income in the Dominican Republic?

In the 1990s, following the earlier example of Chile, pension system reforms were implemented in a number of Latin American and other countries. These reforms focused on introducing models of pension provision that were fully‐funded and privately managed. Although aspects of these reforms have been positive, for many persons covered by these systems retirement income is not adequate. The development of occupational pension plans may offer an alternative, complementary mechanism to help improve pension adequacy. This article discusses different complementary pension plan models and examines the case of the Dominican Republic. It argues that complementary occupational pension plans may be a viable policy option for this developing country.     

Global pension systems and their reform: Worldwide drivers,trends and challenges

Across the world, pension systems and their reforms are in a constant state of flux driven by a shifting focus, moving reform needs, and a changing enabling environment that reflect objective events but also changes in views and perception. The ongoing worldwide financial crisis and the adjustment to an uncertain “new normal” will make future pension systems different from past ones. The objectives of this article are: i) to briefly review recent and ongoing key changes that are triggering reforms; ii) to outline the main reform trends across pension pillars over the last two decades; and iii) to present key policy areas on which the pension reform community will need to focus to make a difference.     

The Politics of Public and Private Pension Generosity in Advanced Democracies

The quantitative strand of social policy research suffers from a triple deficit: analyses of aggregate expenditure dominate, most of the few studies of replacement rates focus on unemployment or sickness benefits while pensions are excluded, and the interdependence between public and private pension plans is often ignored. This article addresses the said deficits, first, by discussing the pension sectors' theoretical peculiarities and by proposing two hypotheses: one on the role played by political parties in implementing public pension retrenchment, and the second on their role in extending private pension plans. Second, the article presents regression results of public pension replacement rate changes in 18 developed democracies. The findings show considerably smaller cuts to pensions than to unemployment or sickness benefits, and striking differences regarding partisan effects between the sectors. Lastly, the article assesses partisan effects on private pension plans, detecting some rather surprising effects. Most noteworthy is the fact that those parties which reduced public pension generosity during the 1990s (i.e. Social Democrats) cannot claim responsibility for compensating these cuts by eliciting higher private engagement.     

The performance of social security contributory and tax‐financed pensions in Central America,and the effects of the global crisis

Over the last 30 years, Latin America has pioneered structural pension reforms. This article focuses on a representative regional sample of seven Central American countries with diverse levels of development (Belize, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and Panama) studying contributory and tax‐financed pensions as well as recent pension reforms. It comparatively assesses system performance regarding five social security principles: unity; universal coverage; adequacy of benefits; equal treatment, solidarity and gender equality; and financial sustainability. It also evaluates the impact of the world crisis on these pension systems, highlighting the differences between public and private pensions, and extracts lessons and suggests policies for the future.     

When Past Reforms Open New Opportunities: Comparing Old-age Insurance Reforms in Bismarckian Welfare Systems

France, Italy, Germany, Austria and Spain have all gone through several waves of pension reforms both in the 1990s and in the early 2000s. Comparing the politics of these reforms shows some similar trends: reforms were usually postponed until European integration and/or economic recession forced governments to act. Before the first wave of reforms, the main form of ‘action’ had been to increase payroll taxes to finance pensions. In the 1990s, reforms were usually negotiated on the basis of a quid pro quo: benefits were intended progressively to decrease in exchange for non-contributory pensions being financed from general tax revenues instead of through the insurance schemes. The second wave of reforms (during the 2000s) seems to have brought more innovation, with new goals such as the development of voluntary private pension funds and the need to increase employment rates among the elderly and to stop early retirement. The article aims, first, to trace the political processes leading to these reforms; second, to reveal the commonalities in these processes between the various cases; and third, to highlight the differences between the first and second waves of pension reform. It will emphasize the role of ‘sequencing’ and demonstrate how each pension reform facilitates the adoption of the next one.     

Developing countries and systemic pension reforms: Reflections on some emerging problems

Since 1981 close to forty countries have introduced systemic pension reforms that have replaced all or part of prior pay‐as‐you‐go (PAYG) schemes with privately managed funded defined contribution (FDC) pillars or systems. However, over the past decade about half of these countries have subsequently cutback on, or entirely eliminated, these FDC schemes. In this article we explore some of the reasons why this reversal is often taking place in developing countries. As part of our analysis we propose a new pension reform typology that goes beyond the commonly used dichotomy between PAYG and pension privatization. We identify and discuss four factors that are of particular relevance to those seeking to understand the pension policy reversals that have been taking place in many developing countries: low pension coverage and incentive incompatibility, triple burden costs, tradeoffs between pension reforms and social pensions, and difficulties with annuitization.     

A comparative analysis of pension reforms and challenges in Ghana and Nigeria

Ghana and Nigeria recently joined a number of countries that have incorporated fully‐funded defined contribution pension programmes into their national social security arrangements. Contemporary analyses of pension reforms, however, continue to focus on middle‐income countries in Latin America and Central and Eastern Europe, as well as on Member States of the Organisation for Economic Co‐operation and Development, thereby marginalizing recent pension policy reforms in sub‐Saharan African countries. This article examines the complete and partial shifts to defined contribution pension programmes in Nigeria and Ghana respectively, and points to a number of contextual and contingency factors that challenge the use of defined contribution schemes as a means to address problems of benefit adequacy in the sub‐Saharan African context.     

Pension system generosity and reform in Algeria, Morocco and Tunisia

Pension systems in the North African countries of Algeria, Morocco and Tunisia are facing a certain number of difficulties. Presenting the characteristics and organizational structure of each, this article identifies the specificities of, as well as the common problems confronting, these countries' pension systems. With reference to authorizing legislation and case simulations, the high level of generosity of the different pension systems is discussed and an analysis presented. In a context of population ageing, it is argued that current levels of generosity cannot be maintained; reform is needed. The article discusses different reform options, the challenges of implementation and the possible macroeconomic impacts of reform.     

Social Dialogue: A Potential "Highroad" to Policies Addressing Ageing in The EU Member States

The impact of demographic ageing on the sustainability of pensions has become the focus of heated debate in Europe, as governments try to reform their welfare systems. Among the most vocal opponents of the reforms are employers' organizations and managements, trade unions and individual workers. The article looks at the issues at stake and the relevance of social dialogue, despite difficulties, for reaching consensus among all stakeholders on acceptable labour market and pension reforms. These have to be comprehensive and free from ideological a priori assumptions. Specific examples of available options are mentioned, including Finland, Denmark, Spain and the United Kingdom.     

Japan's never–ending social security reforms

This paper examines implications of the 2002 population projections for future trends in pension and healthcare costs in Japan. Current redistributive pension and healthcare programmes have resulted in considerably higher per capita income for the aged than the non–aged population. Substantive reforms are needed to lessen the extent of such redistribution, but political considerations have meant that only incremental reforms have been feasible. A start, however, has been made on introducing private initiatives in pensions; and shifting from the command and control model operated by the central government to a contracting model for healthcare.     

Social Security at The Crossroads: Toward Effective Pension Reform in Latin America

Individual pension savings accounts in Latin America promised to improve compliance and raise benefits in a cost‐effective manner, while at the same time raising savings rates, which would in turn promote economic growth. A review of the evolution of pension reform in Latin America shows results to have been mixed. Analyses of the recent reforms generally fail to consider the extent to which the success or failure of pension systems is driven by exogenous factors, including macroeconomic and labour market conditions, and institutions. A number of recent studies have issued a reassessment of the region's reforms that stresses the importance of a basic guaranteed pension benefit and recognizes that a range of alternatives are viable in the region. Pension systems based on individual accounts are undergoing a thorough reevaluation.     

The challenge of pension reform in Georgia: Non‐contributory pensions and elderly poverty

Georgia's national social security system offers almost universal non‐contributory basic pension coverage. The basic pension has, to date, proved effective in dealing with old‐age poverty. But Georgia's fiscal constraints and ageing population also highlight the importance of improving the pension system, in order to ensure its sustainability. This article presents policy reform choices, which suggest that, in Georgia, pension reform might include increasing the statutory retirement ages and reducing the generosity of benefits through means testing. The case of the Georgian non‐contributory basic pension might hold value for some low‐ and middle‐income countries that are considering the implementation of, or expanding coverage under, a non‐contributory pension programme.     

The Changing Face of Pensions in Latin America: Design and Prospects of Individual Capitalization Pension Plans

This paper discusses the spread of individual capitalization pension plans in Latin America in the 1990s. Following the example of Chile in 1980, Argentina, Colombia, Costa Rica, Mexico and Peru have all introduced individual capitalization pension schemes in the 1990s. The paper discusses the rationale for the reforms and compares the main design features of the reformed pension systems in these countries. Lastly, the likely success of pension reform is discussed by focusing on issues of pension scheme coverage, benefit adequacy and administrative costs.     

From reform to crisis: Argentina's pension system

Argentina underwent economic and social collapse in December 2001. The crisis brought the worst socioeconomic indicators in its history, and the pension system was not immune from this disaster, which was unparalleled in any middle-income developing country. In 1994 the pension system had been restructured, and was regarded as a viable model for other reforms elsewhere. This article discusses in general terms the features of the current pension scheme, the structural problems that were not resolved in the reform of 1994, the relation between that reform and the government's financial crisis, and the impact of the economic collapse on the pension system. Finally, it discusses some aspects of the challenges faced in building a system that is financially viable and has the potential to close the major gaps in coverage affecting both the working population and older persons.