Front Matter

Front Matter

Alfredo Cuevas, George Mackenzie, and Philip Gerson
Published Date:
September 1997
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© 1997 International Monetary Fund

Library of Congress Cataloging-in-Publication Data

Mackenzie, G. A. (George A.), 1950–

Pension regimes and saving / G.A. Mackenzie, Philip Gerson, and Alfred Cuevas.

p. cm.—(Occasional paper ; 153)

“September 1997.”

Includes bibliographical references (p.).

ISBN 1-55775-640-6

1. Pension trusts. 2. Old age pensions—Finance. 3. Saving and Investment. 4. Defined benefit pension plans. I. Gerson, Philip R. II. Cuevas, Alfredo. III. International Monetary Fund. IV. Title. V. Series: Occasional paper (International Monetary Fund); no. 153.

HD7105.4.M23 1997




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The following symbols have been used throughout this paper:

  • … to indicate that data are not available;
  • — to indicate that the figure is zero or less than half the final digit shown, or that the item does not exist;
  • –between years or months (e.g., 2001–02 or January-June) to indicate the years or months covered, including the beginning and ending years or months;
  • / between years (e.g., 2001/02) to indicate a fiscal (financial) year.

“Billion” means a thousand million.

Minor discrepancies between constituent figures and totals are due to rounding.

The term “country,” as used in this paper, does not in all cases refer to a territorial entity that is a state as understood by international law and practice; the term also covers some territorial entities that are not states, but for which statistical data are maintained and provided internationally on a separate and independent basis.


There are few subjects in economics more topical than pensions. Public pension plans around the world are coming under fire for various perceived shortcomings. Pension expenditure has become a major burden on the public finances of many countries, both industrial and middle-income, while the payroll taxes that finance these expenditures are thought to impair the workings of labor markets and to contribute to the high rates of unemployment common among European countries.

Of particular concern to some economists has been the impact on saving and growth of pay-as-you-go public pension plans. Their establishment and expansion are thought to reduce aggregate saving in many economies, essentially because the promise of a pension after retirement encourages plan participants to reduce their voluntary saving. These and other concerns have contributed to the popularity of reforms to privatize public pension plans.

Rather than try to deal with all the facets of pension economics, this paper concentrates on the impact of pension regimes on saving, given its central importance to a country’s growth prospects. It analyzes the conditions under which pension reform can increase a country’s saving rate; it also considers how the development of private retirement plans can be stimulated.

The paper is a revised version of a paper prepared for the Executive Board of the International Monetary Fund. The authors received considerable assistance in its preparation. They would especially like to thank Juan Amieva for preparing the notes on Argentina, Colombia, and Peru, revised versions of which appear in Appendix III. Similarly, they thank Andrew Wolfe for his work on the note on Uruguay. Various colleagues in the IMF provided material on specific countries and helpful comments on the paper’s analytical framework, including Martine Guerguil, George Kopits, and Joaquim Levy. Vito Tanzi, Peter Heller, and Teresa Ter-Minassian offered valuable overall guidance. The authors would also like to thank Scott Anderson for research assistance, and Bee Vichailak, Randa Sab, and Pearl Acquaah for secretarial assistance. Diane Cross of the Fiscal Affairs Department and Elisa Diehl of the External Relations Department edited the paper for publication, and Elisa Diehl coordinated its production.

The opinions expressed in this paper are those of the authors and should not be construed as representing the views of the IMF or of its Executive Directors.

Glossary of Abbreviations


Administradoras de Fondos de Ahorro para el Retiro/pension company (Mexico)


Administradoras de Fondos de Pensiones/pension company (Peru)


Civil Servants’ Social Security Institute (Colombia)


Central Provident Fund (Singapore)


consumer price index


Employee Retirement Income Security Act (USA)


mandatory housing-saving fund for state workers (Mexico)


Mexican Social Security Institute


mandatory housing-saving fund for private sector workers (Mexico)


Peruvian Institute of Social Security


individual retirement account (USA)


Social Security Institute (Colombia)


Institute for Social Security and Services for State Workers (Mexico)


invalidez, vejez, cesantia en edad avanzada, y muerte (Mexico)


life-cycle hypothesis


Old-Age, Survivors, and Disability Insurance (USA)


Oficina de Normalizatión Previsional (Peru)




Petróleos Mexicanos


Pension Fund Association (Japan)


retiro, cesantía, y vejez (Mexico)


registered retirement savings plan (Canada)


Sistema de Ahorro para el Retiro/Individual Retirement Account (Mexico)


social security wealth

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