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Index

Aaccountability

as component of goodgovernance, 139

current practices, 148–50limitations on, 160principles of, 142–43regional, 160f

account balanceregional, 35f

accrual ratedefinition, xxviiiearly retirement and, 13links to age of retirement, rates of

return, and contribution rates,12–13, 75, 81, 103–5, 104f

policy recommendations, 13,103–5

administration. See alsomanagement of pension funds

benefit payment procedures, 134

collection procedures, 133contribution payment

procedures, 133–34costs, 135, 135tdefining responsibilities and

benchmarks for, 162, 163fragmentation of pension

systems and, 16, 51, 89, 123, 135

identification of plan members, 133

improving, 16, 133–35income per capita and

administrative capacity, 56233

information systems and, 72,110, 134, 135, 148

outsourcing, 123, 161age

current age of regional population, 22, 45

population age trends, 3,26–27, 27f, 45, 88, 190t

agricultural workers, 52, 55, 124, 128

Algeriaage of eligibility, 78banking sector, 37, 120basic pension compared with

poverty line, 96benefit formula, 72ceiling on covered wages, 66characteristics of pension

system, 194tcoverage rates, 7, 54–55, 56credit flow, 37, 119early retirement, 78financial sector, 46funding of pension system,

15–16, 123gender equity in pension

schemes, 78implicit pension debt, 82–83independent workers

coverage, 52inflation rate, 33integration of pension system, 51labor force growth rate, 27labor unions, 179military pensions, 51minimum pension, 59

Note: b indicates boxes, and f indicates figures

234 Index

Algeria (continued )oil revenues and fiscal stance,

35, 121oil revenues and incentives for

reform, 179old- and young-age dependency

ratios, 24pension reform, 17, 18, 169, 170pension wealth, 66population, 21–22public debt, 165public sector employment, 32redistribution, 9replacement rates, 59reporting on pension

performance, 149reserves, 121–22self-employed pension scheme,

128–29stock exchange, 43survivor pensions, 78tax treatment of pensions,

213, 214unemployment, 31, 33vesting period, 78wage history and implicit rate

of return, 74 fanalyses and diagnoses

role in pushing pensionreform, 18, 179

annual reports, 149annuity markets, 39, 94, 113auditing, 142, 147–48, 149, 162Australia

focus of pension system, 11, 95management principles based on

common law tradition, 159social pensions, 124

Austriafocus of pension system, 95

BBahrain

age of eligibility, 78annual report, 149characteristics of pension

system, 195tcontractual workers

coverage, 51direct investment in

companies, 165early retirement, 78

gender equity in pensionschemes, 78

incentives for delayedenrollment, 72

incentives for salary manipulation, 72

information system, 135, 148labor force growth rate, 27male vs. female life

expectancy, 76minimum pension, 59, 60no personal income tax, 213, 214pension guarantees, 62pension wealth, 63population age trends, 27population growth rate, 22rates of return, 80replacement rate for civil

servants, 62replacement rates, 59, 60reporting on pension

performance, 149reserves, 17, 83, 88, 139survivor pensions, 77vesting period, 78young- and old-age

dependency ratios, 24, 27bank deposits as investment, 166banking sector

benefit payments through, 134contribution payments

through, 134credit flow, 37–38, 37ffunded pensions and stability

of, 120incentives toward liberalization,

38–39overview, 4–5, 36–39, 38tpublic ownership, 120solvency and stability, 38–39

bondscorporate, 5–6, 42–43government, 5, 41–42, 118,

132, 165making implicit pension debt

into public debt, 111, 118,132, 165

Botswanaflat pension, 126

Brazilflat pension, 126level of benefit, 124

Index 235

budget deficits, 121Bulgaria

pension reform, 101

CCaisse d’Assurance Sociale des

Non-Salariés (CASNOS),Algeria

characteristics of, 194tindependent workers

coverage, 52no early retirement, 70underestimation of problems

with, 170wage history used to compute

pension, 72Caisse de Dépôt et de Gestion

(CDG), Moroccoinvestment policy, 158–59outsourcing of management of

reserves, 150portfolio allocation of CDG

assets, 158tCaisse Interprofessionnelle

Marocaine de Retraite(CIMR), Morocco

management of occupationalpension plans, 53

outsourcing of management ofreserves, 150

Caisse Marocaine de Retraite(CMR), Morocco

characteristics of, 205t, 206tcommittees to minimize

corruption and fraud, 148investment policy, 157–58management of, 162reserves, 88survivor pensions, 77, 78

Caisse Nationale de Retraite(CNR), Djibouti

characteristics of afterimplementation of reformlaw, 197t

early retirement incentives, 71integration with OPS, 173, 174motivation for reform, 174replacement rate, 71retirement age, 78

Caisse Nationale de Retraite etd’Assurance (CNRA), Morocco

management of occupationalpension plans, 53

Caisse Nationale de Retraite et dePrevoyance Sociale(CNRPS), Tunisia

characteristics of, 207tCaisse Nationale de Sécurité

Sociale (CNSS), Moroccoaccrual rate, 72characteristics of, 205tearly retirement incentives,

70, 71management of, 158reserves, 88wage history used to compute

pension, 75Caisse Nationale des Retraites

(CNR), Algeriacharacteristics of, 194tearly retirement, 78integrated pension system, 51underestimation of problems

with, 170Canada

focus of pension system, 11, 95management of pension fund,

141, 142, 143management principles based

on common law tradition, 159

Canadian Pension Plan (CPP),141, 143

Caribbean countriesmandatory private pensions, 64pension wealth, 68replacement rates, 7, 65, 69

CASNOS. See Caisse d’AssuranceSociale des Non-Salariés

CDG. See Caisse de Dépôt et deGestion

ceilings on covered wageseffects on income replacement

rates, 7–8, 59, 60, 62international comparisons,

65–66, 67fpolicy recommendations, 98, 99

ceilings on replacement ratesincentives and, 8, 71, 72, 75

Central Asiamandatory private pensions, 64pension wealth, 68replacement rates, 7, 65, 69

236 Index

Central Europeadministrative costs, 135

Chilefunding of pension system,

14, 116pension reform, 101

CIMR. See Caisse Interprofessionnelle Marocaine de Retraite

Civil Servant Retirement Organisation (CSRO), Islamic Republic of Iran

characteristics of, 200tconflict of interest, 147early retirement, 78investment and audit

committees, 148investment policy, 153–54reform, 171reserves, 88, 154t

civil servantspension reform and,

17–18, 178pension systems, 51pension wealth, 63freplacement rates, 7, 60–63, 61fvulnerability of pension

schemes, 80–81civil service reform, 56CMR. See Caisse Marocaine de

RetraiteCNR. See Caisse Nationale de

Retraite (Djibouti); CaisseNationale des Retraites(Algeria)

CNRA. See Caisse Nationale deRetraite et d’Assurance

CNSS. See Caisse Nationale deSécurité Sociale; ConseilNational de Sécurité Sociale

collection procedures, 133Colombia

ceiling on covered wages, 66pension reform, 101

Comité de Suivi des Etudes Actuarielles (CSEA),Morocco

report on pension system, 177conditions for pension reform

overview, 2–6, 21summary, 45–46

conflicts of interest

examples of, 147minimizing, 145, 146

Conseil National de SécuritéSociale (CNSS), Djibouti

creation of, 173, 174mandate of governing body, 146

contractual workers in public sectorcoverage, 51–52

contribution payment procedures,133–34

contribution rateslinks with accrual rates, rates of

return, and retirement age,12–13, 75, 81, 103–5, 104 f

as percent of wages, 33, 55policy recommendations,

13, 105–6corporate bonds, 5–6, 42–43corporate governance, influence

of public pension fund on,144–45, 146

corruption and fraudconflicts of interest and, 147minimizing, 141–42, 145,

147–48, 160Costa Rica

pension reform, 101supervision of pension fund, 142

coverage ratescorrelation with income per

capita, 56effects of economic growth

rate on, 29incentives and, 55methodology for calculating

projected, 191–93overview, 1, 6–7, 53penalties and enforcement

and, 56projected, 57fprospects for expansion of,

56–58, 89regional, 54–55, 54f, 89structural influences on, 54

CPP. See Canadian Pension Plancredit

credit flow, 37–38, 37floans to plan members, 165maturity of debt, 38,

119–20, 165to private sector, 43frelated-party lending, 38

Index 237

CSEA. See Comité de Suivi desEtudes Actuarielles

CSRO. See Civil Servant Retirement Organisation

Ddebt instruments, 5–6, 41–43,

111, 118, 132, 165deceased beneficiaries,

tracking, 134defined-benefit, pay-as-you-go

systemsbenefit formulas, 102–5,

218–22best practices, 108tcomparison of virtual account

formula with defined benefit formula, 218–22

eligibility conditions, 105–7policy recommendations,

102–16defined-contribution schemes, 64delayed enrollment

incentives for, 71–72, 73f, 75demographics. See also specific

demographic characteristicsdemographic data on pension

funds, 223–24“demographic dividend,”

27–28expected changes in the labor

force, 3, 27–29expected dynamics, 3,

25–27, 45methodology for demographic

projections, 185–93population growth rates, 3, 22,

23f, 26, 183tpopulation size, 21–22, 182tregional characteristics, 21–25

demographic transitiondefinition, 46nmethodology for calculating

economic effects of, 190–93regional, 24–25

Denmarkfocus of pension system, 11, 95

deregulationbanking sector, 38–39economic growth and, 31

disability benefits, 114diversification

economic, 31external balance effects, 30higher funding and, 117retirement savings, 8, 73,

116–17risk management and, 145–46

divorce, 78–79, 113, 115–16Djibouti

administrative costs, 135age of eligibility, 78basic pension compared with

poverty line, 96benefit formula, 72benefits payment

procedures, 134characteristics of pension

system, 196t, 197tconstraints on higher

funding, 123coverage of contractual workers

and workers in public companies, 51–52

coverage rates, 55covered wages, 99early retirement, 71fertility rate, 25, 26financial sector, 46funding of pension system,

15–16, 123governing body of pension

system, 147implicit pension debt, 82income per capita, 30information system, 134, 135life expectancy, 25male vs. female life

expectancy, 76management of pension

funds, 166mandate of pension system, 146maximum replacement rate, 71military pensions, 51minimum pension, 59, 65motivation for reform, 17, 178no stock exchange, 6, 43, 119pension expenditures, 81pension guarantees, 62pension reform, 17, 18, 99,

166, 169, 173–74, 179pension wealth, 66political process and reform,

18, 179

238 Index

Djibouti (continued )population, 22population growth rate, 22, 26public debt, 35, 165–66rates of return, 80replacement rate for civil

servants, 62replacement rates, 59, 60, 71reserves, 17, 83, 88,

121–22, 139self-employed and part-time

workers coverage, 52survivor pensions, 77, 78tax treatment of pensions, 214vesting period, 75–76young-age dependency ratio, 24

domestic debt, 42fregional, 41–42

Eearly retirement

accrual rate and, 13incentives for, 8, 70–71, 89rates of return, 8, 70women, 9, 77, 77t, 78, 89,

114, 115earnings-related pension schemes

description, 64formulas for rates of return in,

218–22integration of pension systems

and, 132minimum standards for, 11–14top-ups to, 127–28, 127fvirtual accounts as reform

paradigm for, 108–11Eastern Europe

administrative costs, 135integration of pension

systems, 132mandatory private pensions, 64pension reform, 100t, 101pension wealth, 68replacement rates, 7, 65, 69

economic diversification, 31economic growth

education and, 31effect on pensions, 3–4, 29GDP growth, regional, 30tpension reform and, 3–4trends and prospects, 30–31

economic indicators, regional, iiiteducation and economic growth, 31

Egyptbenefits payment

procedures, 134budget deficits, 121casual workers coverage,

128–29, 199tceiling on covered wages,

60, 66characteristics of pension

system, 198t, 199tcollection inefficiencies, 133contractual workers and

workers in public companiescoverage, 51–52

contribution payment procedures, 134

corporate bonds, 42coverage rates, 7, 54–55, 56credit flow, 37financial sector, 46fiscal balance, 35fragmentation of pension

system, 6funding of pension system,

15, 122–23implicit pension debt, 82–83,

111, 112incentives for delayed

enrollment, 72incentives for salary

manipulation, 72inflation rate, 33informal employment, 33information system, 135insurance sector, 39, 40integration of pension

system, 51investment opportunities, 165investment policy, 150–52labor force growth rate, 27management of pension

fund, 150–52mandate of pension system, 146military pensions, 51motivation for reform, 17–18,

178–79occupational pension plans, 53old- and young-age

dependency ratios, 24pension reform, 17, 112, 165,

169, 174pension wealth, 66population, 21–22

Index 239

population growth rate, 22, 26public debt, 35public ownership of banks, 120public sector employment, 32rates of return, 80regulation of pension plans, 136replacement rates, 7, 60restrictions on private

domestic savings, 35self-employed workers

coverage, 52, 198tstock exchange, 6, 43, 119stock exchange regulation, 44survivor pensions, 77, 79tax treatment of pensions,

213, 214tracking deceased

beneficiaries, 134unemployment, 31

eligibilityflat pension costs and, 126, 126tgender equity in, 9, 76–79, 77t,

89, 114–16incentive problems and, 8,

70–73, 89pension wealth and, 69, 77tpolicy recommendations,

105–7employment

job creation, 4labor costs, 32–33, 45pension reform and, 4severance pay, 32

End-of-Service IndemnityProgram for Private SectorWorkers (NSSF), Lebanon

distribution of assets, 156tinvestment policy, 156reform of, 176

enrollment, delayedincentives for, 71–72, 73f, 75

equity markets. See stockexchanges

exchange ratesrestrictions on, 35, 37shocks and resilience of

banking sector, 39executive summary, xxi–xxviexternal balances

effects on diversification of investments abroad, 30, 46

regional, 3, 35external debt, 41, 42f

Ffamily structure

divorce, 78–79, 113, 115–16need for data on, 129pensions and, 53, 97–98share of elderly living with

their children, internationalcomparisons, 98f

fertility ratesexpected trends, 25–26methodology for calculating,

185–86regional, 24–25, 25f

financial sectorfunding and, 118–19level of development, 36, 94,

122, 161overview, 4–6, 36–44savings and, 73, 94

Finlandfocus of pension system, 11, 95

fiscal balancesimplicit pension debt and, 83regional, 3–4, 34f, 35

flat pensionscosts and eligibility age,

126, 126tincentive effects, 127f, 128means testing, 126–28residency conditions, 126

foreign investmentabroad, 46, 166inflows, 31

formulas used in the analysis,217–22

fragmentation of pension systemsadministrative costs and, 16,

51, 89, 135effects of, 50–52occupational plans and, 52–53overview, 6–7

Francefocus of pension system, 11, 95

full-career worker, 12bfunding

constraints on higher funding,15, 120–23

contribution rates as, 13, 33costs and benefits of higher

funding, 14–16, 116–23financial market development

and, 118–19financing mechanisms, 4, 33

240 Index

fund managers. See alsomanagement of pensionfunds

foreign, 166, 167outsourcing, 161, 166, 167–68third-party supervision,

162–64

GGCSS. See Private Pension FundGDP growth, regional, 30tGeneral Organisation for Social

Insurance (GOSI), Bahraincharacteristics of, 195tgender differences in vesting

period, 78reserves, 88

Germanyfocus of pension system, 11, 95

good governancecurrent practices, 146–48limitations on, 159–61principles of, 140–42

GOSI. See General Organisationfor Social Insurance(GOSI), Bahrain

governing body of pension systemincentives, rewards, and

sanctions, 142, 150mandate of, 141, 146minimizing corruption and

fraud, 141–42opportunities for better

management, 161–64selecting, 141, 146–47shielding from political

interference, 141, 146turnover in, 147

government debt. See public debtGovernment Employees Pension

Fund, Egyptcharacteristics of, 198tmanagement of civil service

pension scheme, 51government employment,

32, 80Gulf Cooperation Council

(GCC) countriesestablishment of GCC, 46npopulation growth rate, 22young- and old-age

dependency ratios, 24

Iimplicit pension debt

higher funding and, 116–17intergenerational transfer

and, 83international comparisons, 82fmaking implicit pension debt

into public debt, 45,111–12, 132, 165

regional, 82–83savings and, 83

implicit rates of returndefinition, xxviiiearly retirement and, 38, 70enrollment age and, 75,

75f, 89formulas for calculating,

217–22incentives and, 8, 70–73savings and, 72–73sustainability of, 3, 9–10,

28–29, 79, 80f, 81, 89–90incentives

coverage rates and, 55, 56to enroll in pension system, 55,

56, 128flat pensions and, 127f, 128for fund managers, 142, 143,

149, 150to game the system, 71–72,

89, 107implicit rates of return and,

8, 70–73problems with, 8, 70–73, 89for savings, 117

income measuredefinition, xxviiiuse to compute pension, 103

income per capitacorrelation with administrative

capacity, 56correlation with coverage

rates, 56growth rate of, 31regional, 30

income replacement rates. See replacement rates

indexation of pensionsautomatic indexation as policy

objective, 33definition, xxviiimechanism for, 14, 105

Index 241

Indonesiapension fund supervision, 142

inflation rateeffects on pensions, 29–30,

45–46, 72indexation of pensions and, 14,

33, 105regional, 3, 34f, 45

informal sector, 4, 33information systems

effects on administration, 72,103, 110, 134, 135, 148

information technology infrastructure, 135, 148

insurance sectoradministration of pension

plans, 122, 136, 148constraints on development, 40life insurance, 39, 113, 119outsourcing of disability

benefits to, 114outsourcing of young-age

survivor benefits to, 113overview, 39–41regional, 40t, 161regulation and supervision, 40–41

integration of pension systems,130–32

interest rates, 38, 38t, 118, 120intergenerational transfer, 10,

75, 83investment committees, 142,

147–48, 164investment opportunities

bank deposits, 166direct investments in

companies, 165foreign assets, 30, 166loans to plan members, 165public debt, 165–66real estate investments, 166

investment policycapacity to design and

implement, 164, 167current practices, 150–59mandate of, 144market power and corporate

governance, 144–45principles of, 143–44risk management, 143–44,

145–46setting, 144

Iran, Islamic Republic ofage of eligibility, 78annual report, 149banking sector, 36–37basic pension compared with

poverty line, 96ceiling on covered wages,

60, 66characteristics of pension

system, 200tcoverage of contractual

workers and workers inpublic companies, 52

coverage rates, 54–55, 55credit flow, 37, 119direct investment in

companies, 165early retirement, 71, 78enrollment age and implicit

rate of return, 75ffertility rate, 25financial sector, 46funding of pension system,

15–16, 123gender equity in pension

schemes, 78governing body of pension

system, 147, 148, 150implicit pension debt, 82inflation rate, 3, 33information system, 148integration of occupational

plans, 16, 131investment and audit

committees, 148investment policy, 152–54labor force growth rate, 27management of pension funds,

122, 152–54mandate of pension system, 146market capitalization, 43military pensions, 51minimum pension, 59, 62, 65motivation for reform, 18,

178–79occupational pension plans, 16,

31, 53old- and young-age

dependency ratios, 24pension guarantees, 62pension reform, 17, 131,

169, 171

242 Index

Iran, Islamic Republic of (continued)pension wealth, 63, 66political process and reform,

18, 179population, 21–22population growth rate, 26public debt, 35, 165public ownership of

banks, 120public sector employment, 32regulation of pension

plans, 136replacement rates, 7, 58, 60,

62, 64reserves, 88self-employed workers

coverage, 52, 129survivor pensions, 77, 78tax treatment of pensions,

213, 215unemployment, 31, 33

Iraqage of eligibility, 78ceiling on covered wages, 60characteristics of pension

system, 201tcoverage of contractual

workers, 51coverage rates, 55female participation in

workforce, 27fertility rate, 26funding of pension system,

15–16, 123implicit pension debt, 82–83income replacement rate, 7information system, 172labor force growth rate, 27management of pension

funds, 166minimum pension, 65pension reform, 17, 169, 172population growth rate, 26replacement rates, 59, 60, 64self-employed and part-time

workers coverage, 52Ireland

pension fund management,141, 143

replacement rate, 64Italy

focus of pension system, 11, 95

JJordan

age of eligibility, 78banking sector, 5, 36–37,

39, 166basic pension compared with

poverty line, 96benefit formula, 72benefits payment

procedures, 134budget deficits, 121characteristics of pension

system, 202tcivil service pensions, 202tcorporate bonds, 42coverage rates, 6, 55credit and funded pensions, 119credit flow, 37early retirement, 78financial sector, 46fiscal balance, 35fragmentation of pension

system, 49–50, 51funding of pension system, 15,

122–23gender equity in pension

schemes, 78governing body of pension

system, 147, 150implicit pension debt, 82implicit rate of return, 70,

71f, 74fincentives for retirement over

work, 70, 71fincentives to restrict private

domestic savings, 35inflation rate, 33information system, 135, 148insurance sector, 40, 41integration of pension

systems, 131investment opportunities, 165investment policy, 154–56, 164labor force growth rate, 27management of pension funds,

122, 164, 167mandate of pension

system, 146military pensions, 51, 202tminimum pension, 59motivation for reform, 17, 18,

178–79

Index 243

occupational pension plans, 53pension debt, 10, 82pension reform, 17, 18, 99,

164, 169, 175–76, 179pension wealth, 66political process and reform,

18, 179political reshuffling, 147population growth rate, 26public debt, 35public sector employment, 32rates of return, 80regulation of pension plans, 136replacement rates, 59reporting on pension

performance, 149reserves, 88self-employed and part-time

workers coverage, 52stock exchange, 6, 43, 119stock exchange regulation, 44survivor pensions, 77–78tax treatment of pensions, 215unemployment, 33young-age dependency ratio, 24

KKenya

pension fund supervision, 142Kosovo

social pensions, 124Kuwait

labor force growth rate, 27population age trends, 27population growth rate, 26young- and old-age

dependency ratios, 24, 27

Llabor costs, 32–33, 45labor force

ability of labor force to absorbnew workers, 28

expected changes, 27–29female participation, 27,

184t, 189fgrowth rate, 27, 28f, 84, 190tmethodology for

projections, 187projected female and male

participation rates, 189flabor unions, 170

Latin Americaintegration of pension

systems, 132mandatory private pensions, 64pension reform, 100t, 101, 132pension wealth, 68replacement rates, 7, 65, 69young-age survivor benefits,

113–14Latvia

indexation of pensions, 105pension reform, 101

Lebanonbanking sector, 4, 5, 36, 39,

46, 166budget deficits, 121characteristics of pension

system, 203–4tcivil service pensions, 203–4tcontractual workers

coverage, 51coverage rates, 55credit flow, 37external debt level, 41fertility rate, 25financial sector, 46fiscal balance, 35funding of pension system, 15,

121, 122–23inflation rate, 33information system, 148insurance sector, 39, 40, 41investment policy, 156labor force growth rate, 27management of pension

funds, 156mandate of pension

system, 146military pensions, 51, 203–4tmotivation for reform, 17, 178old- and young-age

dependency ratios, 24, 27pension expenditures, 81pension reform, 17, 18, 169,

175, 179political process and reform,

18, 179political reshuffling, 147population growth rate, 22private sector workers

coverage, 51public debt, 35, 121

244 Index

Lebanon (continued )replacement rates, 60–61self-employed and part-time

workers coverage, 52stock exchange, 43tax treatment of pensions,

213, 215unemployment, 31, 33

Libyacapped interest rates, 120characteristics of pension

system, 204tcoverage rates, 6, 54credit and public sector

financing needs, 119direct investment in

companies, 165female participation in

workforce, 27financial sector, 46funding of pension system,

15–16, 123governing body of pension

system, 147, 150implicit pension debt, 82–83integration of pension

system, 51investment policy, 156–57labor force growth rate, 27management of pension funds,

122, 156–57, 166mandate of pension system, 146military pensions, 51minimum pension, 59oil revenues and incentives for

reform, 179old- and young-age dependency

ratios, 24pension reform, 17, 18, 169,

170–71pension wealth, 66population growth rate, 26public debt, 165replacement rates, 59, 60risks and constraints on higher

funding, 123tax treatment of pensions, 215

life expectancymethodology for calculating,

185–86regional, 25fretirement age and, 106

trends, 25–26women, 114, 115women vs. men, 76

life insurance, 39, 113, 119loans to plan members, 165Luxembourg

focus of pension system, 11, 95

Mmacroeconomics, 29–36, 45–46macroeconomic stability, 33–36Management and Planning

Organization (MPO),Islamic Republic of Iran, 171

management of pension fundsaccountability, 142–43, 148–49capacity to design and

implement investmentpolicy, 164, 167

centralization of, 123code law traditions and, 159conflicts of interest, 145,

146, 147constraints on, 159, 161defining responsibilities and

benchmarks, 162disclosure of governance

structures and responsibilities,142, 148–49

disclosure of policy making,performance, and financialsituation, 143, 149

economic constraints, 161governance structures and,

121–22, 146–48incentives, rewards, and

sanctions, 142, 150investment policy, 143–44,

150–59mandate of governing body,

141, 146minimizing corruption and

fraud, 141–42, 145, 147–48mismanagement, 139outsourcing, 15, 17, 122, 123,

166, 167–68overview, 17, 139–40policy recommendations,

16–17, 161–64, 167–68principles of good governance,

139, 140–42, 159–60regional, 146–59

Index 245

reward structures, 142, 150risk management, 143–44,

145–46selection of governing body,

141, 146–47shielding funds from political

interference, 141, 160supervision, 142, 148, 167transparency, 142, 143, 145,

149, 161–64mandate of pension system

adequacy as objective, 94, 95, 96f

choosing and implementing,10–11, 94–102

insurance function as objective,95, 96f

international comparisons,63–69

mandate of governing body,141, 146

mission statements, 161–62, 167overview, 7–8

manipulation of system, 71–72,89, 107

maternity benefits, 115, 116Mauritius

social pensions, 124means testing, 126–28methodology for demographic

and employment projections, 185–93

Mexicopension reform, 101

military pensionspension reform and, 17–18, 178vulnerability of pension

schemes, 80–81minimum pensions

income replacement patternsand, 59–60, 74, 75

international comparisons, 65, 66f

poverty line and, 95–96, 97f,98–99

vesting period and, 14, 107minimum wage, 95–96mission statements, 161–62, 167Morocco

accrual rate, 75agricultural sector workers not

covered, 55

banking sector, 5, 39, 166basic pension compared with

poverty line, 96benefit formula, 8, 71–72benefits payment

procedures, 134budget deficits, 121ceiling on covered wages, 60, 66characteristics of pension

system, 205t, 206tcollection inefficiencies, 133committees to minimize

corruption and fraud, 148contractual workers

coverage, 51coverage rates, 6–7, 55, 56credit and funded pensions, 119credit flow, 37disability benefits, 114early retirement, 71, 78external debt level, 41female participation in

workforce, 27fertility rate, 25financial sector, 46fiscal balance, 35fragmentation of pension

system, 6, 50funding of pension system, 15,

122–23gender equity in pension

schemes, 78governing body of pension

system, 147implicit pension debt, 10, 82implicit rate of return, 70, 71fincentives for retirement over

work, 70, 71finflation rate, 33information system, 135, 148insurance sector, 39, 40, 41integration of occupational

plans, 131investment opportunities, 165investment policy, 157–59labor force growth rate, 27labor unions, 179management of pension funds,

122, 142, 148, 157–59, 162, 164

market capitalization, 43military pensions, 51

246 Index

Morocco (continued )minimum pension, 59–60, 65motivation for reform, 18,

178–79occupational pension plans,

53, 177pension debt, 10, 82pension guarantees, 62pension reform, 17, 18,

122–23, 164, 169, 177, 179pension wealth, 66political process and reform,

18, 179population, 21–22population growth rate, 22public debt, 35, 165regulation of pension plans, 136replacement rate for civil

servants, 62replacement rates, 59, 60, 71reporting on pension

performance, 149reserves, 83, 88self-employed and part-time

workers coverage, 52stock exchange, 43, 119stock exchange regulation, 44survival rate, 219fsurvivor pensions, 77, 78tax treatment of pensions,

213, 215unemployment, 31, 33

mortality rates, 24–25MPO. See Management and

Planning Organization(MPO), Islamic Republicof Iran

NNational Investment Bank (NIB),

Egyptbalance sheet, 151tincentives for reform,

17–18, 179market interest rates, 151frole in pension system, 112,

150–52national savings, 117–18New Zealand

management principles basedon common law tradition, 159

pension fund management, 141social pensions, 124taxing of flat pension, 127

NIB. See National InvestmentBank

noncontributory pensions. See social pensions

NSSF. See End-of-Service Indemnity Program for Private Sector Workers

Oobjectives of pension system

adequacy as objective, 94, 95, 96f

implicit objectives, 58–69insurance function as objective,

95, 96foccupational pension plans

fragmentation of pensionsystems and, 52–53

integration of pension systemsand, 131

occupational plansintegration of pension systems

and, 132regulation of, 136

OECD. See Organisation forEconomic Co-operation

oil priceseconomic diversification

and, 31oil revenues

effect on fiscal stance, 121incentives for reform and, 179

old-age dependency ratiosprojected, 84, 84f, 188fregional, 22, 23f, 24, 24ftrends, 27

Omanlabor force growth rate, 27population growth rate, 26young-age dependency ratio, 24

OPS. See Organisme de Protection Sociale

Organisation for Economic Co-operation (OECD)countries

female participation in workforce, 27

focus of pension systems, 95indexation of pensions, 105

Index 247

mandatory private pensions, 64occupational plans, 64old-age dependency ratio, 27pension wealth, 68replacement rates, 7, 63, 65, 69share of elderly living with

their children, 98fOrganisme de Protection Sociale

(OPS), Djiboutiadministrative costs, 134characteristics of, 196tincentives for salary

manipulation, 72integration with CNR, 173, 174motivation for reform, 174replacement rates, 71retirement age, 78

output per capita, labor forcegrowth rate and, 28

outsourcingadministration, 123, 161disability benefits, 114fund management, 15, 17, 122,

123, 150, 166, 167–68young-age survivor benefits, 113

Ppart-time workers, 52patterns in pension reform,

17–19, 178–80payment procedures

benefit payment procedures, 134contribution payment

procedures, 133–34penalties and enforcement

coverage and, 56for mismanagement of funds,

143, 150pension debt

accumulation of, 88, 90implicit pension debt and

sustainability of pensionsystem, 82–83, 90

international comparisons, 82fmaking implicit pension debt

into public debt, 45,111–12, 132, 165

redistribution and, 76regional, as percentage of

GDP, 10pension expenditures

regional, 1, 81f

Pension Fund Commission(PFC), Bahrain

characteristics of, 195treserves, 88

Pension Reform Options Simulation Toolkit(PROST), 84–88

pension wealthcivil servants, 63, 63fdefinition, xxviii, 62–63, 88ngender equity and, 76international comparisons,

66–68, 67f, 69tregional, 62t, 66–68women, 76, 77t

PFC. See Pension FundCommission

Polandpension reform, 101

policy maker as initiator ofreform, 18, 179

political interference, 141,146–47, 160

political process of reform, 18, 179population

age trends, 3, 26–27, 27f, 45,88, 190t

current age of regional population, 22, 45

current size of regional andinternational populations,21–22, 182t

methodology for calculatingprojected, 185–86

population growth ratesprojected, 187tregional, 3, 21–22, 23f,

26, 183tregional and international

comparisons, 22fpoverty

age and, 130alleviation as mandate for

pension system, 94basic pension level and, 95, 96,

98–99, 124social pensions and, 123–30

PPEEPF. See Public and PrivateEnterprises Employees Pension Fund

principles of good governance,139, 140–42, 159–60

248 Index

Private Pension Fund (GCSS),Republic of Yemen

administrative costs, 135characteristics of, 209–10t

private sector investment, 31private sector workers

pension systems, 51replacement rates, 7, 58–60

privatization, 31, 56productivity trends, 31progress and prospects in pension

reform, 17–19, 169–80PROST. See Pension Reform

Options Simulation ToolkitPublic and Private Enterprises

Employees Pension Fund(PPEEPF), Egypt

characteristics of, 198trole in management of pension

systems, 51, 52public debt

bonds, 5, 41–42, 118, 132, 165budget deficits, 121investment policy and, 165–66making implicit pension debt

into public debt, 45,111–12, 132, 165

regional, 4, 34f, 35–36role in debt markets, 41–42, 118

public sector employment, 32, 80

QQatar

labor force growth rate, 27population age trends, 27young- and old-age

dependency ratios, 24, 27

RRCAR. See Régime Collectif

d’Assurance et de Retraitereal estate investments, 166redistribution

equity and, 73–76, 89gender equity and, 9, 76–79income measure effects on, 103intergenerational transfer, 10,

75, 83overview, 9social pensions and, 123–30tax treatment of pensions

and, 211

reformframework for, 10–16, 93–136implementing, 99–102integration of pension systems,

130–32need for prompt intervention,

88, 90, 180overview, 10–16, 93patterns of pension reform,

17–19, 99–102, 178–80progress and prospects, 17–19,

169–80Régime Collectif d’Assurance et

de Retraite (RCAR),Morocco

characteristics of, 206tdelayed retirement

incentives, 71funding, 123integration of occupational

plans with, 177management of, 158pension debt, 10, 82replacement rates, 71reserves, 83, 88salary used to compute

pension, 8, 71–72workers in public enterprises

coverage, 51Régime des Non-Salariés (RNS),

Tunisiacharacteristics of, 207tearly retirement, 71retirement age, 78self-employed workers

coverage, 52Régime des Salariés Non-

Agricoles (RSNA), Tunisiacharacteristics of, 207tenrollment age and rate of

return, 75freserves, 88salary used to compute

pension, 72Régime Salariés Associés du

Secteur Agricole (RSAA),Tunisia

agricultural workers coverage, 52

characteristics of, 207tRégime Salariés du Secteur

Agricole (RSA), Tunisia

Index 249

agricultural workers coverage, 52

characteristics of, 207tregulation

banking sector, 38–39insurance sector, 39, 40–41penalties and sanctions, 56,

143, 150pension funds, 16, 136, 142,

148, 160regional regulatory quality, 160fstock exchanges, 44

replacement ratesceilings on, 8, 71, 72, 75choosing, 97in civil servant pension

schemes, 60–63, 61fdefinition, 7, xxviii, 58effects on savings, 72–73gross replacement rates, 58–59,

59f, 65f, 68–69, 68tinternational comparisons, 11,

63–69, 65f, 68t, 95objectives of pension systems

and, 11, 58, 95overview, 7–8in private sector worker

pension schemes, 58–60regional, 62t, 89sustainability and, 89

reporting requirements, 162, 167reserves

as buffer fund for crises, 83, 110international comparisons, 140fmanagement of, 122mismanagement of, 139regional level of, 17, 83, 139, 140ftrends toward depletion,

88, 90residency conditions, 126resource-tested schemes, 63revalorization of wages

definition, xxviiineed for, 12pension reform and, 103, 104

reward structures, 142, 143, 150risk management, 143–44, 145–46risk management committee, 142risk management committees,

147–48RNS. See Régime des

Non-Salariés

RSA. See Régime Salariés duSecteur Agricole

RSAA. See Régime Salariés Associés du Secteur Agricole

RSNA. See Régime des SalariésNon-Agricoles

Ssalary manipulation, incentives

for, 71–72, 89, 107Saudi Arabia

fertility rate, 26labor force growth rate, 27young-age dependency

ratio, 24savings

“demographic dividend” andrate of, 28

diversification, 8, 73, 116–17financial sector development

and, 73, 94implicit pension debt and, 83incentives, 7–8men with multiple wives, 115national savings, 117–18pension system mandate

and, 94rates of return on, 116–17tax treatment of pensions

and, 211self-employed workers

incentives to enroll in contributory system, 128–29

pension schemes, 52, 124, 198tseverance pay, 32small and medium businesses

funded schemes and development of, 118

social assistance programs,129–30

social pensionschoosing benefit level, 124costs, 126teligibility age and residency

conditions, 126financing, 129international comparisons, 125tlinks to current contributory

systems, 128–29links to social assistance

programs, 129–30

250 Index

social pensions (continued )means testing, 126–28purpose of, 7, 123–24

Social Security and Welfare(SSW), Iraq

characteristics of, 201tretirement age, 78

Social Security Corporation(SSC), Jordan

characteristics of, 202tcivil servants coverage, 51and creation of SSIU, 154, 155incentive for retirement over

work, 70integration of pension

systems, 131investment policy, 155–56military pensions, 52motivation for reform, 18pension debt, 10, 82pension reform, 99, 175political process and reform,

18, 179portfolio composition, 155fretirement age, 78

Social Security Fund (SSF), Libyaassessment of, 170characteristics of, 204tcivil servants and private sector

workers coverage, 51distribution of reserves, 157tgoverning body appointment,

147, 156–57investment policy, 156–57pension reform, 170–71public debt as percentage of

assets, 170self-employed workers

coverage, 52Social Security Investment Unit

(SSIU), Jordancode of conduct, 147creation of, 154–55investment policy, 155, 164mandate of governing

body, 146Social Security Organization

(SSO), Islamic Republicof Iran

characteristics of, 200tconflict of interest, 147early retirement, 71

enrollment age and rate ofreturn, 75f

integration of occupationalplans, 16, 131

investment and audit committees, 148

investment policy, 152–53reform, 171reserves, 88self-employed workers

coverage, 55structure of portfolio

investments, 153fsurvivor pensions, 77, 78

South Asiareserves, 139

SSC. See Social Security Corporation

SSF. See Social Security FundSSIU. See Social Security

Investment UnitSSO. See Social Security

OrganizationSSW. See Social Security and

Welfarestock exchanges

market power of pension managers, 144–45

overview, 6regional limitations, 43–44,

119, 161structure of pension systems,

49–53, 50tsupervision

foreign, 166, 167outsourcing, 15, 122, 166,

167–68regulation and supervision of

pension funds, 142, 148third-party, 162–64

survival rate forecasts, 186fsurvivor pensions

men with multiple wives and, 115old-age survivor benefits, 113policy recommendations,

112–14regional, 77–79, 89young-age survivor benefits,

113–14sustainability of pension systems

implicit pension debt and,82–83, 90

Index 251

implicit rates of return and, 3,9–10, 28–29, 79, 80f, 89–90

overview, 9–10, 79–88Sweden

ceiling on covered wages, 66constraints on market

power, 145disability benefits, 114indexation of pensions, 105maternity benefits, 116pension management costs, 123pension reform, 101residency conditions, 126survivor pensions, 113

Syriabanking sector, 46capped interest rates, 120credit flow, 37, 119female participation in

workforce, 27financial sector, 46informal employment, 33labor force growth rate, 27no stock exchange, 6, 43, 119pension reform, 17, 169young-age dependency ratio, 24

Ttaxes

collection, 133contribution rates and, 105–6economic effects, 95on flat pensions, 127on insurance premiums, 40marginal tax rates, 31on pensions, 60, 136,

211–16, 213treplacement rates and, 97tax incentives for savings, 117virtual accounts, 110

Thrift Savings Plan for FederalEmployees, U.S., 123

trade liberalization, 31transparency

as component of good governance, 139

disclosure of governance structures and responsibilities,142, 143, 149

disclosure of policy making,performance, and financialsituation, 149

increasing, 161–64minimizing corrupt practices,

141–42, 145reporting requirements and,

162, 167treasury bills, 5, 41–42, 165trustees. See also fund managers

code law traditions and, 159lack of experienced, 161

Tunisiaaccrual rate, 75age of eligibility, 78agricultural workers coverage,

52, 128–29banking sector, 5, 39, 166benefit formula, 72characteristics of pension

system, 207tcollection inefficiencies, 133contractual workers coverage, 51corporate bonds, 6, 42coverage rates, 7, 54–55, 56credit and funded pensions, 119credit flow, 37early retirement, 71enrollment age and implicit

rate of return, 75ffemale participation in

workforce, 27fertility rate, 25financial sector, 46fragmentation of pension

system, 6, 50funding of pension system,

15, 123implicit pension debt, 83inflation rate, 33information system, 135labor force growth rate, 27management of pension

system, 164military pensions, 51minimum pension, 59motivation for reform, 18,

178–79oil revenues and fiscal

stance, 121old- and young-age

dependency ratios, 24, 27pension guarantees, 62pension reform, 17, 164,

169, 172

252 Index

Tunisia (continued )pension wealth, 63, 66population age trends, 27population growth rate, 22public debt, 35redistribution, 9replacement rate for civil

servants, 62replacement rates, 59, 60reserves, 88, 121–22self-employed workers

coverage, 52stock exchange, 43, 119stock exchange regulation, 44survivor pensions, 78tax treatment of pensions, 213,

215unemployment, 31, 33

turnover ratios, 44–45, 44f

Uunemployment

coverage rates and, 29, 54crisis of, 31–33, 45economic growth rate and, 30funding of pension system

and, 29methodology for projections,

187–90projected regional

rates, 192fregional rates of, 4, 31, 32tseverance pay, 32young workers, 31–32

United Arab Emirateslabor force growth rate, 27old- and young-age

dependency ratios, 24, 27population age trends, 27population growth rate, 22, 26

United Kingdomfocus of pension system, 11, 95management principles based

on common law tradition, 159

United Statesfocus of pension system, 11, 95management principles based

on common law tradition, 159

pension management costs, 123

Vvesting period

accrual rate and, 13, 75definition, xxviiigender equity in, 9, 78minimum, 75–76policy recommendations, 14,

106–7virtual accounts

administration of, 110benefits of, 14, 109–10comparison of virtual account

formula with defined benefit formula, 218–22

criticisms of, 110as paradigm for reforming

earnings-related schemes,108–11

tax treatment, 110young-age survivor benefits

and, 113–14

Wwage history

incentives for salarymanipulation, 71–72, 89, 107

pension computation and, 103West Bank and Gaza

audit committee, 162characteristics of pension

system prior to reform, 208tcontractual workers and public

sector workers coverage, 52covered wages, 99draft law on public pensions,

162, 163bfertility rate, 26flat pension, 126foreign assets, 166funding of pension system,

15–16, 123gender equity in pension

schemes, 78implicit pension debt, 82income per capita, 30inflation rate, 3, 33information system, 134investment committee, 162labor force growth rate, 27management of pension funds,

162, 166, 167motivation for reform, 17, 178

Index 253

no stock exchange, 6, 43pension fund management, 162pension reform, 17, 18, 122,

169, 177–78, 179population, 22private sector workers not

covered, 51public debt, 35replacement rates, 60self-employed and part-time

workers coverage, 52tax treatment of pensions,

213, 215unemployment, 33young-age dependency

ratio, 24women

divorce, 78–79, 113, 115–16early retirement, 9, 77, 77t, 78,

89, 114, 115gender equity in pension laws,

9, 76–79, 77t, 89, 114–16life expectancy, 76, 114, 115maternity benefits, 115, 116participation in workforce, 3,

27, 184t, 189fpension wealth and, 76, 77tsurvivor pensions, 77–79, 89unemployment, 31vulnerability to pension

reform, 9, 79, 89workers in state-owned

enterprises, coverage, 51–52Worker’s Welfare Bank, Islamic

Republic of Iran, 142World Bank

pension reform assistance, 2PROST model development,

84source of survival and fertility

rate forecasts, 185

YYemen, Republic of

administrative costs, 135age of eligibility, 78banking sector, 4, 36benefit formula, 72characteristics of pension

system, 209–10tcivil service pensions, 62,

209–10t

contractual workers coverage, 51

coverage rates, 55covered wages, 99early retirement, 71female participation in

workforce, 27fertility rate, 26financial sector, 46funding of pension system,

15–16, 123income replacement rate, 7inflation rate, 33information system, 135labor force growth rate, 27male vs. female life

expectancy, 76management of pension

funds, 166military pensions, 51,

209–10tminimum pension, 59, 65no stock exchange, 6, 43, 119old-age dependency ratio

trends, 27pension expenditures, 81pension reform, 17, 169,

172–73pension wealth, 66police pension fund, 209–10tpopulation growth rate, 22public debt, 35, 165–66rates of return, 80replacement rate for civil

servants, 62replacement rates, 59, 60, 64reserves, 121–22self-employed workers

coverage, 52survivor pensions, 77–78tax treatment of pensions, 215unemployment, 33vesting period, 78young-age dependency

ratio, 24young-age dependency ratio

regional, 24, 24fyoung workers

regional age of population, 3, 84

unemployment rates, 31–32

This is the first comprehensive assessment of pension systems in the Middle East and North

Africa. The authors have compiled a wealth of information regarding the institutional,

demographic, and financial situation of more than 30 pension schemes in the region, which

are benchmarked against those in other countries in the world.

T ime for Change shows that pensions systems in Middle East and North African countries

face serious problems in terms of limited coverage, fragmented administration, and system

design that harm economic efficiency and equity. In addition, and despite still favorable

demographics, the financial equilibrium of the schemes is under threat. All schemes are

accumulating large and unsustainable implicit pension debts. The inescapable future aging

of the population will aggravate this problem.

The authors argue that countries in the region have a window of opportunity today to

initiate reforms. They provide a framework for guiding discussions and for making objective

policy choices. Novel mechanisms to expand coverage to vulnerable population groups are

discussed. The authors emphasize that there is no single paradigm to be followed when

reforming a pension system and that choices need to reflect local cultural, social, and

economic conditions.

ISBN 0-8213-6185-6