Averting the old age crisis

Conclusion

Although the kind of reform that is needed will vary across countries, all countries should have a vision of where they are going in the long run. This vision should include separate mechanisms for redistribution and savings along with shared responsibility between the public and private sectors.

The right share of responsibility for each pillar will not be the same for all times and places. It depends on a country’s objectives, history, and current circumstances, particularly the relative strength of its redistributive and savings goals, its financial market development, and its taxing and regulatory capability. The pace at which a mandatory multipillar system should be introduced will also vary—from quick in middle- and high-income countries whose systems are in serious trouble to very slow in low-income countries, which should avoid these same mistakes.

Tackling pension reform won’t be easy and talk of reform elicits strong emotions, especially in countries where expectations of generous pensions have been built up through the years. Nonetheless, change in current systems is inevitable and the longer reform is delayed, the more urgent and difficult it becomes. Countriescan avert the old age crisis. To do so, they should begin planning and educating the public now.