Prague Economic Papers 2009, 18(4):291-308 | DOI: 10.18267/j.pep.355

The Perspective of Pension System Reforms in the New Member States

Mejra Festić1, Jože Mencinger2
1 Faculty of Economics, University of Maribor and EIPF, Ljubljana, Slovenia (mejra.festic@uni-mb.si).
2 Faculty of Law, University of Ljubljana and EIPF, Ljubljana, Slovenia (Joze.mencinger@eipf.si).

Because of growing awareness of financial needs for public pensions, attention has been focused on privatisation of the pension systems. While the privatisation of pension funds can encourage development of capital markets in New Member States, equity investment in transition economies is even more volatile than in the ""old"" capitalist countries. Privatised pension system coincides with investment risks, higher administrative costs, and inability of private markets to provide retirees with affordable, indexed and certain annuities. Namely, private sector may not provide enough investment projects to efficiently absorb mandated pension savings and the expected pension income is subject to a number of risks: poor and volatile investment returns, longevity, and inflation eroding the purchasing power of pensions. Indeed, the PAYG system appears to be the only viable system to perform well in terms of risk and volatility of returns.

Keywords: cyclicality, pay-as-you-go, ageing of population, pension funds, financial burden
JEL classification: J23, J31, J48, O15

Published: January 1, 2009  Show citation

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Festić, M., & Mencinger, J. (2009). The Perspective of Pension System Reforms in the New Member States. Prague Economic Papers, 18(4), 291-308. doi: 10.18267/j.pep.355
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