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Are Second Pillar Pensions Robust in the Face of Economic Shocks?

Mamta Murthi's picture

A view from Central Europe and the Baltics

An elderly Roma woman Saving for old age is important in countries where longevity is increasing. Countries in Central Europe and the Baltics emerged from the economic transition of the 1990s recognizing that they needed to encourage their workforce to retire later and save more in order to be comfortable in old age. To this end, they modified their pay as you go pension systems which collects taxes from workers to pay retirees (the "first pillar") to create an additional or "second pillar" of individual pension accounts funded by taxes. As these second pillar pension accounts were the private property of individual workers, they were expected to encourage saving. Over time as these savings grew, it would be possible to reduce the pensions paid by the government from the first pillar without reducing the standard of living for pensioners who would be able to rely on complementary pensions from their private saving in the second pillar. Typically, a share of payroll tax receipts  was redirected to finance individual pension saving accounts. This resulted in revenue shortfalls in pay as you go you pension schemes, and most governments raised additional debt to meet their obligations which was in turn held by the companies who were managing the pension savings on behalf of employees. However, since the economies were growing rapidly, fiscal deficits were generally kept manageable, easing concerns about additional debt.

Long Live The Internal Market! (But How Competitive is the EU?)

Matija Laco's picture

A vibrant private sector - with firms investing, creating jobs, and improving productivity - is absolutely essential for promoting growth and expanding opportunities. In order to support the private sector, however, governments need to step in and remove obstacles to growth and job creation. Although macroeconomic stability and sustainability are unquestionably necessary for spurring business activity, the quality of the business regulation also matters.
Collectively, the 10 indicators in Doing Business 2014 are a great tool for assessing the ease of doing business in countries and measuring the quality of their regulations.

The results can be surprising for some countries in the European Union (EU): Would you ever consider that the most difficult country to start a business in the EU is Austria? That Italy is the worst place to pay taxes? That one of the top countries in protecting investors is Slovenia? Or that Poland is the global runner-up in providing information about credit?

Youth Video Contest Winners Offer Solutions to Poverty

Liviane Urquiza's picture

Youth Video Contest Winners Offer Solutions to Poverty

When you are young and still in school, it’s hard to think of ways you can change people’s thinking at the global level. But sometimes, all you need is a video camera and Internet access.

Today, the winners of the European Development Days video contest “Young voices against poverty,” are being recognized for their contributions to the dialogue on global poverty.

Why Have FDI Flows to Emerging Europe Remained Stable in Recent Years?

Gallina Andronova Vincelette's picture

Eleven of the less prosperous members of the European Union – Bulgaria, Croatia1, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, the Slovak Republic, and Slovenia (EU11)—have remained attractive destinations for Foreign Direct Investment (FDI). The Czech Republic, Estonia, and Slovakia witnessed FDI levels in 2012 similar to pre-crisis levels. Poland and Bulgaria also experienced large gains in FDI in 2012.

Go Latin participation!

Maria Rodriguez's picture

As you all know, a new round of bloggers will soon begin to write, so I guess this is one of my last posts! I’ve enjoyed each one of the almost 20 posts I’ve written since March 2009, but I’ve enjoyed even more reading and hearing your comments and thoughts.  This is what it’s all about: Hearing what our generation has to say about the main issues that are related to our world’s development.