Information about Asia and the Pacific Asia y el Pacífico
Equitable and Sustainable Pensions
Front Matter

Front Matter

Benedict Clements, Frank Eich, and Sanjeev Gupta
Published Date:
March 2014
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Information about Asia and the Pacific Asia y el Pacífico
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Equitable and Sustainable Pensions: Challenges and Experience should be on the desk of everyone interested in pension policy. It provides clear descriptions of pension systems in a broad sample of countries around the world, a coherent analytic framework for thinking about them, and thoughtful suggestions for reform in each of them. No reader will agree with every reform suggestion, and not all statistical questions are answered. But every reader’s horizon will be broadened by exposure to the remarkable diversity of answers various countries have given to a common set of questions and by this book’s balanced analysis, which is at once nonideological and sensitive to the values, history, and administrative capability in each country.

Henry J. Aaron

Bruce and Virginia MacLaury Senior Fellow, The Brookings Institution

Creating equitable and sustainable pensions is one of the main policy challenges of the twenty-first century. Policymakers need to be reminded constantly of the challenges that they need to confront. This timely collection of essays by experts in the field offers an analysis of the core issues which is based on rigorous thinking, but presented in an accessible way. It provides discussion of both general issues and specific country experiences which bring these into sharp relief.

Timothy Besley

Professor of Economics and Political Science, London School of Economics

This book provides a very rich coverage and a lot of food for thought on a topic that gets typically limited quality attention in the discussion of pension systems and reforms: equity. Placing it at the same level as financial sustainability and exploring the conceptual underpinnings and country-specific trade-offs that emerged in recent pension reforms closes a critical gap in the international pension reform discourse. Presenting recent country reforms and outstanding challenges from across the world through an equity-cum-sustainability lens offers valuable design and implementation lessons that policymakers and researchers would hate to miss.

Robert Holzmann

Professor and Chair, Old-Age Financial Protection, University of Malaya, Malaysia

This comprehensive volume investigates the equity and sustainability of pensions in a wide range of advanced and emerging market economies in Asia, Europe, and Latin America. The introductory chapters consist of an excellent overview of the volume, a sweeping review of the past and future spending on pensions for both developed and emerging market economies, and a wonderful summary of theoretical considerations. After that, the focus shifts to specific equity issues—the treatment of the poor and of women and the question of equity across generations, all discussed in an international context. The third section presents analyses of individual-country experiences and challenges, often written by academics or policymakers from the region. This volume should be a standard reference for anyone interested in pension policy. Read the early sections to get an overview of world pension developments and how to think about structuring pensions and then pick and choose among the country studies as the need for examples of successes and failures arises.

Alicia H. Munnell

Peter F. Drucker Professor of Management Sciences, Carroll School of Management, and Director, Center for Retirement Research, Boston College

Equitable and Sustainable Pensions Challenges and Experience


Benedict Clements, Frank Eich, and Sanjeev Gupta

© 2014 International Monetary Fund

Cover Design: IMF Multimedia Services

Cover Illustration: Randy Lyhus

Composition: Apex CoVantage

Cataloging-in-Publication Data

Joint Bank-Fund Library

Equitable and sustainable pensions: challenges and experience / editors, Benedict Clements, Frank Eich, and Sanjeev Gupta. — Washington, D.C.: International Monetary Fund, 2014.

pages; cm

Includes bibliographical references and index.

1. Pensions. I. Clements, Benedict J. II. Eich, Frank. III. Gupta, Sanjeev. IV. International Monetary Fund.

HD7091.E68 2014

ISBN: 978-1-61635-950-8 (paper)

ISBN: 978-1-48439-509-7 (ePub)

ISBN: 978-1-47556-532-4 (Mobipocket)

ISBN: 978-1-47556-519-5 (PDF)

Disclaimer: The views expressed in this book are those of the authors and should not be reported as or attributed to the International Monetary Fund, its Executive Board, or the governments of any of its member countries.

Please send orders to:

International Monetary Fund, Publication Services

P.O. Box 92780, Washington, DC 20090, U.S.A.

Tel.: (202) 623-7430 Fax: (202) 623-7201





Sustainability and equity stand out as key considerations in the various pension reform debates that are currently underway around the world. For a long time, policymakers have been mindful of the impact of changing demographics, including the implications for the future of pensions. But the recent global economic and financial crisis has made pension reform an even greater priority for policymakers. Two particular factors stand out for me.

First, the crisis has contributed to large increases in public debt in many advanced economies. Pensions are often the largest single expenditure in the budget—in many cases they account for over 20 percent of noninterest government spending. The fiscal policy debate must thus address the sustainability of pension systems, including by containing the growth of pension benefits. Pension reforms can also provide room for other outlays that can boost growth over the longer term, such as public investment. Many governments are therefore working on measures to ensure that their pension system, and the social support it provides, is sustainable over the long run. Additionally, many emerging market economies are addressing the low level of pension coverage, and their main challenge is to expand it in a fiscally sustainable way.

A second important impact of the crisis is the heightened awareness of equity considerations. Citizens and their governments in many parts of the world have become more concerned about inequality and more mindful of fairness, including between different generations. Intergenerational equity—which has always been a key part of the pensions debate—has therefore assumed even greater prominence following the crisis.

Despite the growing interest in inequality, relatively little work has been done on the equity aspects of pension reform. I very much welcome this book because it helps fill this void by exploring the challenges and experience of countries in designing sustainable and equitable pension systems. It draws on work by the IMF’s Fiscal Affairs Department that was presented to the institution’s Executive Board in January 2012. It also includes several chapters that were prepared by experts outside the IMF for recent conferences held in Vienna and at the IMF’s Regional Office for Asia and the Pacific in Tokyo. The book addresses both general considerations in designing sustainable and equitable pension systems and the lessons from 12 country and regional studies.

Pension reform is complex, and often involves trade-offs between competing goals. There are also different views on what is meant by an “equitable” or a “fair” pension system. By providing a wide-ranging discussion of different perspectives on the sustainability and equity of pension reforms, this book contributes, I hope, to the debate and provides guidance on one of the most important fiscal policy challenges of our time.

Christine Lagarde

Managing Director

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