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FIAP > Boletín – Otras Publicaciones > Retreat from mandatory pension funds in Eastern European countries is the result of a fiscal and financial crisis. Causes, effects and recommendations for fiscal rules – Dariusz Stańko et al. February 2016
27 April, 2016

Retreat from mandatory pension funds in Eastern European countries is the result of a fiscal and financial crisis. Causes, effects and recommendations for fiscal rules – Dariusz Stańko et al. February 2016

Authors: Kamila Bielawska; Agnieszka Chłoń-Domińczak; Dariusz Stańko

The purpose of this study is to assess, in several dimensions, the causes and effects of the decline of the mandatory pension funds in certain Central and Eastern European countries (ECE), and propose changes to the existing fiscal rules and regulations, for responding to the challenge imposed on public finances by the impact of aging populations.

The report seeks to examine the changes in the multipillar pension systems of the ECE region: Hungary, Poland, Lithuania, Latvia, Estonia, Bulgaria, Slovakia and Romania. Since the end of 1990 and early 2000, all of these countries have introduced multipillar pension systems to replace the traditional PAYGO systems. These countries are also EU Member States and are subject to European economic coordination policies, which involve the situation of public finances. However, the analysis reveals that these countries have different social and economic contexts, from the standpoint of the pension systems.

The project makes a thorough assessment of the consequences of limiting the role of the second individually funded accounts pillar in the social security of these countries, from both the macro (public finances) and micro perspectives (the level of pensions people receive), as well as the combination of these two approaches.

The report has seven chapters. The first chapter describes the design and changes in the multipillar pension systems in the ECE countries, in the light of the situation of public finances and the socio-economic context. Chapter 2 discusses how the pension fund markets operate due to the changes recently introduced by governments. Chapter 3 provides an assessment of the short-term effects of the reduction of the weight of the second individually funded accounts pillar on the public finances situation and the PAYGO system in each one of the countries analyzed. Chapter 4 analyses the impact of the changes in the pension system on the level of pensions for individuals. Chapter 5 provides an assessment of the long-term impact of changes in the individually funded systems on the stability of public finances and pension systems. Chapter 6 presents the recommendations on how to achieve a balance between fiscal stress and the need to maintain the role of pension funds in the development of adequate and sustainable pensions in the future. The final chapter summarizes the results.

To review the full study, please download it here.

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